Suppose a firm has an annual budget of $200,000 in wages and salaries,$75,000 in materials,$30,000 in new equipment,$20,000 in rented property,and $35,000 in interest costs on capital.The owner/manager does not choose to pay himself,but he could receive income of $90,000 by working elsewhere.The firm earns revenues of $360,000 per year. What are the annual implicit costs for the firm described above?
A)$450,000.
B)$160,000.
C)$90,000.

Question

Quizplus · Accepted Answer

The annual implicit costs for the firm would be the income that the owner/manager could receive by working elsewhere, which is $90,000. This represents the opportunity cost of running the business instead of working elsewhere and earning a salary. Therefore, the total implicit costs would be $90,000.

Suppose a Firm Has an Annual Budget of $200,000 in Wages