Question

Production Problem Set i Saved Help Save & Exit Submit Explicit and Implicit Costs Exercise 2 (Algo) 2 1 points Barney decides to quit his job as a corporate accountant, which pays $12,000 a month, and goes into business for himself as a certified public accountant. He runs his business from his converted garage apartment, which he could rent out for $315 a month if he wasn't using it as a home office. He must purchase office supplies worth $85 a month, and his monthly electricity bill has increased by $40 now that he is working out of his home office. After six months of working from home, Barney has earned an average of $17,000 per month eBook Print Instructions: Enter your answers as a whole number. References a. What are Barney's monthly explicit costs? $ b. What are Barney's monthly implicit costs? $ c. What are Barney's monthly economic costs?

Answer 1

a. The computation of the explicit cost is shown below:

Explicit cost = Purchase of office supplies + Monthly electricity bill

                    = $ 85 + $ 40

                    = $125

b. The computation of the implicit cost is shown below:

Implicit cost = Lost of salary + rent out amount lost

                    = $12,000 + $315

                    = $12315

c. The computation of the cost is shown below:

Economic cost = Explicit cost + Implicit cost

                         = $125 + $12 315

                         = $12440