Scenario 13-5
Samantha has been working for a law firm and earning an annual salary of $80,000.She decides to open her own practice.Her annual expenses will include $15,000 for office rent,$3,000 for equipment rental,$1,000 for supplies,$1,200 for utilities,and a $35,000 salary for a secretary/bookkeeper.Samantha will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-5.Samantha's annual economic costs will equal

Question

Quizplus · Accepted Answer

Samantha's economic costs include both explicit costs and implicit costs. Explicit costs are $15,000 (rent) + $3,000 (equipment) + $1,000 (supplies) + $1,200 (utilities) + $35,000 (salary) = $55,200. Implicit costs include the foregone salary of $80,000 and the foregone interest of $500. Therefore, total economic costs = $55,200 + $80,000 + $500 = $135,700.

Scenario 13-5 Samantha Has Been Working for a Law Firm and Earning