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Scenario: Betty's Cookie Shop
Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it.
-(Scenario: Betty's Cookie Shop) Betty's implicit and explicit costs are equal to:

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Explicit costs include wages ($25,000) and equipment/materials ($75,000), totaling $100,000. Implicit costs include the forgone salary ($100,000) and forgone interest from selling the shop ($4,500), totaling $104,500. Combined, they equal $204,500.

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