Chandler is getting ready for poker night at his apartment. If he was not having poker night, then he could have made $1200 at his job in data processing \& statistical reconfiguration for multinational corporations. He spent $60 on cigars, $20 on snacks, and $50 on drinks. Which of the following statements about his costs is FALSE? (Mark all that apply.) His economic cost is $1200 His explicit cost is $1200 His implicit cost is $1200 His opportunity cost is $1200
The false statements are:
- His economic cost is $1200
- His explicit cost is $1200
- His implicit cost is $1200
- His opportunity cost is $1200
Explanation:
- Economic cost includes both explicit and implicit costs. In this case, Chandler's economic cost would include the cost of the cigars, snacks, and drinks, as well as the opportunity cost of not earning $1200 at his job. Therefore, his economic cost is not just $1200, it is the sum of all his expenses and the forgone wages.
- Explicit cost refers to the actual out-of-pocket expenses incurred. In this case, Chandler spent $60 on cigars, $20 on snacks, and $50 on drinks. Therefore, his explicit cost is $60 + $20 + $50 = $130, not $1200.
- Implicit cost refers to the opportunity cost of using resources in a particular way. In this case, Chandler's implicit cost would be the wages he could have earned if he had not chosen to have poker night. Therefore, his implicit cost is the $1200 he could have made at his job, not $1200.
- Opportunity cost refers to the value of the next best alternative that is forgone when a particular choice is made. In this case, Chandler's opportunity cost is the $1200 he could have made at his job, not $1200.