Josh and Alex work as design engineers creating high‑end lighting fixtures. After one particularly enlightened afternoon, they decide to follow their dreams and open a cupcake bakery. Please classify their various costs.Supplies like sugar, butter, and baking traysAdvertising space taken out on a social networking siteThe salary Alex earned in his previous job designing light fixturesThe garage spaced used for baking that can no longer be rented out to a college studentThe money they pay their neighbor's six-year old son to deliver cupcakes to their customersImplicit costsNot a costExplicit costs

Implicit cost is the amount which is paid already but are not displayed in the books. It is represents the opportunity cost that is created by the seller outside the firms working. It simply means that the firm is not using an outside unit to earn but using their own assets to run a business in the economy. Explicit cost is are normal or daily expenditures incurred by the company or firm inorder to function the market. Includes wages, rent, cost of production etc. The above expenditures can be classified as under:

Answered: Josh and Alex work as design engineers…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Josh and Alex work as design engineers creating high‑end lighting fixtures. After one particularly enlightened afternoon, they decide to follow their dreams and open a cupcake bakery. Please classify their various costs.

Supplies like sugar, butter, and baking trays
Advertising space taken out on a social networking site
The salary Alex earned in his previous job designing light fixtures
The garage spaced used for baking that can no longer be rented out to a college student
The money they pay their neighbor's six-year old son to deliver cupcakes to their customers

Implicit costs	Not a cost	Explicit costs

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