Question

1. John gives up a shift at work so he can go to Universal with a friend. He spends $250 at Universal. He would have earned $120 during the shift at work. John's explicit cost of going to Universal is $____, his implicit cost of going to Universal is $____, and his opportunity cost of going is $____. If John had decided not to go, instead he went to work he would have made $____.

2. When the price of a good (shoes, apples, iphones, etc.) rises, there is an incentive for buyers to consume ____(more/less) and an incentive for sellers to produce ____(more/less).

Answer 1

1. John gives up a shift at work so he can go to Universal with a friend. He spends $250 at Universal. He would have earned $120 during the shift at work. John's explicit cost of going to Universal is $250, his implicit cost of going to Universal is $120, and his opportunity cost of going is $120. If John had decided not to go, instead he went to work he would have made $120.

2. When the price of a good (shoes, apples, iphones, etc.) rises, there is an incentive for buyers to consume LESS(more/less) and an incentive for sellers to produce MORE(more/less).

An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, as opposed to implicit costs, where no actual payment is made.

an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent.

IMPLICIT COST IS NOTHING BUT OPPORTUNITY COST ONLY.

the law of demand states that, "conditional on all else being equal, as the price of a good increases, quantity demanded decreases; conversely, as the price of a good decreases, quantity demanded

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