Mutale, a lawyer, working for a large law firm and earning K60, 000 per year, is contemplating setting up his own law practice. He estimates that renting an office would cost K10,000 per year, hiring a legal secretary would cost K20,000 per year, and purchasing supplies, paying for electricity, telephone and so forth would cost another K5, 000 per year. The lawyer estimated that his total revenue for the year would be K100, 000. a) How much are the explicit costs of running the law firm? b) How much are the implicit costs? c) How much are the economic costs? d) Should the lawyer go ahead to set up the law firm?
Mutale, a lawyer, working for a large law firm and earning K60, 000 per year, is contemplating setting up his own law practice. He estimates that renting an office would cost K10,000 per year, hiring a legal secretary would cost K20,000 per year, and purchasing supplies, paying for electricity, telephone and so forth would cost another K5, 000 per year. The lawyer estimated that his total revenue for the year would be K100, 000. a) How much are the explicit costs of running the law firm? b) How much are the implicit costs? c) How much are the economic costs? d) Should the lawyer go ahead to set up the law firm?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Mutale, a lawyer, working for a large law firm and earning K60, 000 per year, is
contemplating setting up his own law practice. He estimates that renting an office would
cost K10,000 per year, hiring a legal secretary would cost K20,000 per year, and
purchasing supplies, paying for electricity, telephone and so forth would cost another
K5, 000 per year. The lawyer estimated that his total revenue for the year would be
K100, 000.
a) How much are the explicit costs of running the law firm?
b) How much are the implicit costs?
c) How much are the economic costs?
d) Should the lawyer go ahead to set up the law firm?
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