Asked by Jason Fraser on May 02, 2024
Verified
Harvey quit his job at State University, where he earned $58,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $8,000 a year. To start the business, he cashed in $60,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 15,000 units of software at $60 for each unit. Of the $60 per unit, $50 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The implicit costs of Harvey's firm in the first year were
A) $150,000.
B) $72,000.
C) $78,000.
D) $900,000.
Implicit Costs
The opportunity costs that arise from using resources that could have been employed in an alternative capacity, but do not involve a direct monetary payment.
Entrepreneurial Talent
The skills, creativity, and initiative demonstrated by individuals in starting and managing new businesses, often driving innovation and economic growth.
Production Costs
The total expense incurred in manufacturing a product or providing a service, including raw materials, labor, and overheads.
- Ascertain the complete economic outlays of a business, incorporating explicit and implicit costs.
Verified Answer
ZK
Zybrea KnightMay 07, 2024
Final Answer :
B
Explanation :
Implicit costs for Harvey's firm include his forgone salary of $58,000, forgone entrepreneurial income of $8,000, and the forgone interest from the bonds ($60,000 * 10% = $6,000). Adding these together gives $58,000 + $8,000 + $6,000 = $72,000.
Learning Objectives
- Ascertain the complete economic outlays of a business, incorporating explicit and implicit costs.