Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

For each one of the costs below, explain whether the resource cost is explicit or implicit, and give the annual opportunity cost for each one.

  1. For each one of the costs below, explain whether the resource cost is explicit or implicit, and give the annual opportunity cost for each one. Assume the owner of the business can invest money and earn 10 percent annually.

a) a computer server to run the firm's network is leased for $6,000 per year.

b) the owner starts the business using $50,000 of cash from a personal savings account.

c) A building for the business was purchased for $18,000 million three years ago but is now worth $30 million.

d) computer programmers cost $50 per hour. the firm will hire 100,000 hours of programmer services this year.

e) the firm owns a 1975 model Clarke-Owens garbage incinerator, which it uses to dispose of paper and cardboard waste. even though this type of incinerator is now illegal to use for environmental reasons, the firm can continue to use it because its exempt under a "grandfather" clause in the law. however, the exemption only applies to the current owner for use until it wears out or is replaced. (Note: the owner offered to give the incinerator to the Smithsonian Institute as a charitable gift, but managers at the Smithsonian turned it down.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

In this analysis we will determine whether each cost is an explicit or implicit cost and then calculate the annual opportunity cost for each resource Opportunity cost is the value of the next best alt... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technology Ventures From Idea To Enterprise From Idea To Enterprise

Authors: Richard C Dorf, Byers

3rd Global Edition

9780071289214

More Books

Students also viewed these Economics questions

Question

What is the difference between a licensor and a licensee?

Answered: 1 week ago