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    Explicit Cost, Implicit Cost or Not Needed to Be Reflected

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    Tom total revenue from his cafe is 50000/ yr, he bought a coffee machine costing $5000 with ($2000 of which is his savings which the bank gave him an interest rate of 5% and $3000 is a loan from the bank which the rates is 10%). If he work as a sales man he can earn $30000 /yr. What is his explicit and implicit cost.

    I know that the (5% of 2000) is implicit cost.
    $30000 + (10% of 3000) is the explicit cost.

    However i am confuse. Do i need to add the cost of the machine of $5000 to explicit or implicit cost? Or i don't have to place this value any where.

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    Solution Preview

    Explicit cost: 10% of 3000 ONLY - the 30000 is the salary that Tom might have received if he worked as a sales man. ...

    Solution Summary

    The solution determines if explicit, or implicit cost or not needed to be reflected.