Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

Question

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Answer 1

Question

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

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Question Seven There are specific applications of the hidden-action or moral hazard model. Consider employment contracts signed between a firm's owners and a manager who runs the firm on behalf of the owners. The manager is offered an employment contract which they can accept and decide how much effort, e ≥ 0, to exert. Suppose that an increase in effort, e, increases the firm's gross profit, not including payments to the manager, but is personally costly to the manager and the firm's gross profit, Пg, takes the following form: Пg = e +ε, ε~N(0,2). Let s denote the salary, which may depend on effort and/or gross profit, depending on what the owner can observe, offered as part of the contract between the owner and manager. Suppose that the manager is risk averse and has a utility function with respect to salary of the form: Aσ² U(W)=μ- 2 a) Derive the optimal result of the owner's expected net profit where there is full information and state what it implies. b) Suppose now that the…

1. The IS/MP model assumes that the Fed sets the real interest rate at a given level Rt. Suppose the Fed adopts a monetary policy rule that instructs it how to change the real interest rate in response to short-run output. Let's call this a monetary policy rule (MPR): The parameter x is positive. Rt=+xY a) Redraw the IS/MP diagram replacing the MP curve with the MPR curve. Show how an aggregate demand shock affects output and interest rates in the short run. Use the IS and MPR equations to solve for the changes in output and the real interest rate. b) How does the change in a affect investment in the IS/MPR model? Explain how a tax cut affects short-run output and investment in this version of the short-run model. The effect on investment is called crowding out. c) Add the Phillips curve to complete the short-run model. Illustrate how the Fed's choice of large it makes reveals its trade off between inflation and output in the short run.

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Answer 2

Question

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

Answer 6

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

Answer 7

Chapter 7, Problem 1SQP

(a)

To determine

Identify, the managerâ€™s salary is an implicit cost or an explicit cost.

Answer 8

(a)

Expert Solution

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

Answer 13

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

Answer 14

(b)

To determine

Identify, payment to Dell for computers is an implicit cost or an explicit cost.

Answer 15

(b)

Expert Solution

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

Answer 16

(b)

Expert Solution

Answer 17

(b)

Expert Solution

Answer 18

Expert Solution

Answer 19

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

Answer 20

(c)

To determine

Identify, salary forgone is an implicit cost or an explicit cost.

Answer 21

(c)

Expert Solution

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Answer 22

(c)

Expert Solution

Answer 23

(c)

Expert Solution

Answer 24

Expert Solution

Answer 25

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

Answer 26

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

Answer 27

(d)

To determine

Identify, interest forgone is an implicit cost or an explicit cost.

Answer 28

(d)

Expert Solution

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

Answer 29

(d)

Expert Solution

Answer 30

(d)

Expert Solution

Answer 31

Expert Solution

Answer 32

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

Answer 33

(e)

To determine

Identify, medical insurance payment is an implicit cost or an explicit cost.

Answer 34

(e)

Expert Solution

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

Answer 35

(e)

Expert Solution

Answer 36

(e)

Expert Solution

Answer 37

Expert Solution

Answer 38

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

Answer 39

(f)

To determine

Identify, income forgone is an implicit cost or an explicit cost.

Answer 40

(f)

Expert Solution

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.