Suppose you own a restaurant that serves only dinner. You are trying to decide whether or not to rent out your dining room and kitchen during mornings to another firm, The Breakfast Club, Inc. That will serve only breakfast. Your restaurant currently has the following monthly costs:

Rent on building: .................................$ 2,000

Electricity: $ ............................................ 1,000

Wages and salaries: .......................... $15,000

Advertising: ..........................................$ 2,000

Purchases of food and supplies: .......$ 8,000

Your foregone labor income: .............$ 4,000

Your foregone interest: .......................$ 1,000

a. Which of your current costs are implicit, and which are explicit?

b. Suppose the Breakfast Club, Inc offers to pay $800 per month to use the building. They promise to use only their own food, and also to leave the place spotless when they leave each day. If you believe them, should you rent out your restaurant to them? Or does it depend? Explain.