16 Fill in the blarks:Duringyear of operation, a4 spends $25,000La bore expeme, utilities,e nent. the owbenmcollects $29,300In aevenuematerials,onmawthe nre have provided t100.000 ok themown Hrm indead of inveting10 pereent annualts of Thethe implicit eos tsTotal eeonomie eost isoney to the2 earningthe moneyie ate o netuan the explicit cosbinm areareThe inmeconomieeanmPholsit of $the finm's accountingProfito is ¢

Answered: Fill in the blarks: Durang A year of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

16 Fill in the blarks:
During
year of operation, a
4 spends $25,000
La bore expeme, utilities,e nent. the ow
benm
collects $29,300
In aevenue
materials,
on
maw
the nre have provided t100.000 ok them
own Hrm indead of inveting
10 pereent annual
ts of The
the implicit eos ts
Total eeonomie eost is
oney to the
2 earning
the money
ie ate o netuan the explicit cos
binm are
are
The inm
economie
eanm
Pholsit of $
the finm's accounting
Profito is ¢

Expert Solution

Step 1

Given,

Revenue = $29,300

Spending = $25,000

Money provided to firm = $100,000

Interest rate = 10% or 0.10

The explicit cost is the cost or expenses which a firm pays to inputs or pay for ongoing production activity. For example, rent, labor, and raw material.

Explicit cost = $25,000

The implicit cost is the opportunity cost of using the owner resource which does not involve money payment. For example, the rent forgone of the owner building earned by the owner if the owner rented out the building rather using it for business.

Implicit cost = Interest payment forgone

= Money provided to firm* Interest rate

= 100,000*0.10

= 10,000

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