Francis wants to buy some paintings for their store to make it feel more classy. Francis would need to take $20,000 out of their savings account (which earns 1% interest a year) in order to finance the paintings. At the end of the year, Francis knows they could sell the paintings for $20,000 but they would choose not to. When calculating this year's economic profit, Francis would count this as a: a. explicit cost of $20,000 and an implicit cost of $2,000. b. explicit cost of $20,000 and an implicit cost of $20,000. c. explicit cost of $20,000. d. implicit cost of $2,000.

Francis wants to buy some paintings for their store to make it feel more classy. Francis would need to take $20,000 out of their savings account (which earns 1% interest a year) in order to finance the paintings. At the end of the year, Francis knows they could sell the paintings for $20,000 but they would choose not to. When calculating this year's economic profit, Francis would count this as a: a. explicit cost of $20,000 and an implicit cost of $2,000. b. explicit cost of $20,000 and an implicit cost of $20,000. c. explicit cost of $20,000. d. implicit cost of $2,000.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.6IP

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	a.	explicit cost of $20,000 and an implicit cost of $2,000.
	b.	explicit cost of $20,000 and an implicit cost of $20,000.
	c.	explicit cost of $20,000.
	d.	implicit cost of $2,000.