Question

Which examples involve only implicit opportunity costs (not explicit costs)?

Check all that apply:

A firm using cash to buy Treasury bills

A real estate company using a rental apartment as its own office

A company using a spare machine for a new project

A firm withholding licensing rights from others to gain a competitive adv

Answer 1

Implicit opportunity costs are costs which are only implied but not recorded. The implicit opportunity costs here are:

a). A real estate company using a rental apartment as its own office (the company is missing out on receiving rental income)

b). A company using a spare machine for a new project (the spare machine could have been sold or used for something else)

c). A firm withholding licensing rights from others to gain a competitive adv (firm is losing out on licensing fees)