Suppose a person quits a job earning $60,000 per year and starts a business with $120,000 withdrawn from a money-market account earning 12 percent per year. The implicit cost of the business is $ for the entrepreneur's time plus for the entrepreneur's funds (enter your response as an integer).

Suppose a person quits a job earning $60,000 per year and starts a business with $120,000 withdrawn from a money-market account earning 12 percent per year. The implicit cost of the business is $ for the entrepreneur's time plus for the entrepreneur's funds (enter your response as an integer).

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Production And Costs

Section: Chapter Questions

Problem 6WNG

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Question

Suppose a person quits a job earning $60,000 per year and starts a business with $120,000 withdrawn from a
money-market account earning 12 percent per year.
The implicit cost of the business is $ for the entrepreneur's time plus for the entrepreneur's funds (enter your
response as an integer).

Expert Solution

Step 1

Introduction

In an economics perspective, the total expenses for businesses and individuals can generally be divided into explicit costs and implicit costs. Only the explicit costs are taken into account when calculating the accounting profit or normal profit. While calculating the super-normal or economic profit, implicit expenses, also known as opportunity costs, are considered as well.

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