Question

If you choose to spend an additional year in school, the income you forgo by NOT working that year

A. is an implicit cost.
B. is an explicit cost.
C. will always be smaller than the explicit cost of attending school.
D. should not be a factor in the decision.

Answer 1

Answer: Option A

Explanation: In simple words, implicit cost or opportunity cost refers to the cost of choosing the best alternative over the second best alternative. It refers to the profits that would have been earned if we chose second best alternative and not the best one.

Hence the cost of losing the income from going to school one more year represents implicit cost.

Thus, the correct option is A.