Mike Wants to Open His Own Repair Shop,and Is Considering

question 81

Multiple Choice

Mike wants to open his own repair shop,and is considering using his savings of $30,000 to get it started.He is currently earning 3 percent interest on his savings.His friend Bob calls him and asks to borrow $30,000 to start up a bagel shop; Bob offers to pay him 5 percent interest if he loans him the money.If Mike were to use the money to open his own repair shop,how can he accurately account for his costs?

• A) Mike must consider the $900 in forgone interest on his savings as an implicit cost.
• B) Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost.
• C) Mike must consider the $900 in forgone interest on his savings as an explicit cost.
• D) Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an explicit cost.