Efficiency, equity and production costs

Exercise I: Explicit and implicit costs Determine and explain whether each of the following is an explicit or implicit cost: Remember to explain in one or two sentences the reason for your answer.

a) Income from wages that an owner could earn if he did not work for himself.

b) The payment of rent for a warehouse that is rented by the company.

c) The possible income received from the rental to another company of a building owned by the company that uses it as a warehouse for its own production.

d. Payments made for labor hired in the labor market.

Exercise II: Economic efficiency: profit or loss measures

Calculate the accounting profit or loss as well as the economic profit or loss in each of the following situations:

(you must present the procedure of your calculations to obtain the final result) a. A company with total revenues of $ 130 million, explicit costs of $ 80 million, and implicit costs of $ 20 million

b.A company with total revenues of $ 145 million, explicit costs of $ 110 million, and implicit costs of $ 15 million

c. A company with total revenues of $ 110 million, explicit costs of $ 80 million, and implicit costs of $ 50 million

d. A company with total revenue of $ 350,000, explicit costs of $ 395,000, and implicit costs of $ 40,000