Ralph owns a small pizza restaurant, where he works full-time in the kitchen. his total revenue last year was $100,000, and his rent was $3,000 per month. he pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. his total explicit costs for the year were

$66,000

Explanation:

Explicit costs are usually referred to as accounting costs because they only include costs that are actually paid, e.g. wages and salaries, rent, or materials, and they do not include opportunity costs or money that could be earned by doing something else.

Ralph's explicit costs = rent + employee's salary + ingredient and overhead = ($3,000 x 12) + ($2,000 x 12) + ($500 x 12) = $36,000 + $24,000 + $6,000 = $66,000

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