Question

Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. What are Sebastian's implicit costs from running his own business? a. ​$30,600 b. ​$50,000 c. ​$55,600 d. ​$75,600

Answer 1

Option a is correct.

Step-by-step explanation:

Implicit Cost

Job Offer = 30,000 (highest is to be taken)

Withdrawal from own savings = 20,000

Interest on savings = 3%

Interest = 600

Total = 30,000 + 600 = 30,600