Final answer:
Amy's explicit costs for her bakery include all direct expenses such as ingredients and rent. Marketing expenses are considered explicit costs, as they require direct payment for advertising. Implicit costs are opportunity costs of what could be earned elsewhere, for example, an income foregone to run the business.
Step-by-step explanation:
When Amy decides to open a bakery specializing in gourmet brownies, her explicit costs include all the tangible and direct expenses associated with running the business, such as ingredients, rent, utilities, equipment purchases, and employee salaries. These costs are easily quantifiable and necessary for the daily operations of her bakery. Marketing expenses are also explicit costs because they involve direct outlay of money for advertising the bakery's brownies to bring in customers, which is essential for generating revenue.
On the other hand, implicit costs refer to the opportunity costs of utilizing resources that could have been deployed elsewhere for financial gains. For instance, if Amy had another job and she gave that up to start the bakery, the salary she is foregoing would be considered an implicit cost because it's the income she is sacrificing to run her own business.
An example that illustrates implicit costs can be seen in the scenario where Eryn or Fred decide to open their own practices. In doing so, they would have to quit their current jobs with a salary of $125,000. This amount represents an implicit cost of opening their own firm, as it is not a direct outlay but rather an opportunity foregone.