Question

Suppose that Acme Widget Co. can produce 100 widgets a week. To produce this many widgets, the company needs $100 worth of wood. $50 worth of plastic and $30 worth of other materials. It also needs to hire two workers and pay them $75 each. To help in production, the company leases a widget making machine for $80 per week. Mr. Acme needs to be working at the factory each day, as well. He could have worked for Beta Zerc Company for $70/week, Bill's Flange Corp. for $90/week or Joe's Ditch Digging Service for $110 week. If Mr. Acme asked his accountant to compute his costs for the week. he'd tell him A: $. If he asked his economist to compute his costs, he'd tell him B: $.

Answer 1

Accountant only takes into account Explicit Costs.

Cost calculated by Accountant= 100+50+30+(2×75)+80=$ 410

Economists take both Explicit and Implicit Costs in their total cost calculation.

Cost calculated by Economist:

If Mr Acme works for Beta zere company= 100+50+30+150+80+70=$ 480

If Mr Acme works for Bill's Flange Corp Service=100+50+30+150+80+90= $500

If Mr. Acme works for Joe's Ditch Digging Service= 100+50+30+150+80+110= $520