Betty runs a shop where she sells $1 each cookie. In a year, she could sell 200,000 cookies average. She employs 5 people who each worked a total of 500 hours a year. She paid them a wage of $10 per hour. She also has costs from equipment and raw materials around $75,000 a year. Other companies have offered to pay Betty $80,000 if she would come to work for them. She could rent out her shop for $5,000; assume there is no depreciation. Betty’s implicit costs are:
her salary if she worked elsewhere and rent that she forgoes.
The revenue she receives from selling her cookies, labor costs, and equipment cost
Labor costs and equipment and raw material costs
Revenue she receives from selling her cookies and labor costs
her salary if she worked elsewhere and rent that she forgoes.
(Implicit cost is the benefit forgone by not working somewhere else. So, implicit cost is the salary forgone which she would have earned by working somewhere else and the rent forgone.)
Betty runs a shop where she sells $1 each cookie. In a year, she could sell...
Gita is an auto mechanic and runs a small repair shop. She hires one mechanic at $20,000 per year, pays a monthly rent of $5,000 towards the lease of the premises where her repair shop is located, and spends $20,000 per year on materials needed for repairing cars and trucks. She has invested $40,000 of her own savings in heavy equipment (air and strut compressors, brake lathes, heavy-duty lifts etc.) that could earn her $4,000 per year if invested elsewhere....
Paolo lives in Philadelphia and runs a business that sells pianos. In an average year, he receives $842,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $452,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $38,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Paolo does...
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1. Peggy-Sue loves to bake cookies and recently left her job at Cookie Monster, Inc., (making $125,000 per year) to start her own cookie-baking business. Her annual costs would include $40,000 for labor, $10,000 for rent, $35,000 for ingredients, and $5,000 for utilities. She withdrew $100,000 of her own savings to invest in the operation, which had been earning 10 percent interest per year. List Peggy-Sue’s total costs of operating her own cookie business, and specifically indicate which items are...
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1. Definition of economic costs Edison lives in Dallas and runs a business that sells boats. In an average year, he receives $842,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $452,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $38,000 in rent per year. Assume that the value of this showroom does not depreciate over the...
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1. Definition of economic costs Lorenzo lives in Philadelphia and runs a business that sells guitars. In an average year, he receives $701,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $420,000; he also pays wages and utility bills totaling $247,000. He owns his showroom; if he chooses to rent it out, he will receive $9,000 in rent per year. Assume that the value of this showroom does not depreciate over the...
Antonio lives in Denver and runs a business that sells boats. In an average year, he receives $842,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $452,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $38,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Antonio does...