Question

If Larry starts a new pizza parlor and hires a manager at $30,000 per year. Is he better off managing the restaurant himself, since he can always avoid the explicit cost of $30,000 by not paying himself a salary?

Answer 1

No, he is not better off in that situation by not paying him a salary, Larry might be having some opportunity cost while siting at the restaurant. Maybe he can do other jobs are well and make a better profit. After getting the implicit cost i.e. the opportunity cost or the sacrifice Larry will make to sit in the restaurant, we can say that he is better off or not. If he is giving up some job where he is making less than 30,000 then he should sit at the restaurant if he can earn more then he will not be better off.