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.© BrainMass Inc. brainmass.com October 9, 2019, 11:53 pm ad1c9bdddf
Explicit cost: 10% of 3000 ONLY - the 30000 is the salary that Tom might have received if he worked as a sales man. ...
The solution determines if explicit, or implicit cost or not needed to be reflected.