Scenario 13-11
Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each.
-Refer to Scenario 13-11. An economist would calculate the total profit for one birdhouse to be

Question

Quizplus · Accepted Answer

The economist would consider both the explicit costs (materials) and the implicit costs (opportunity cost of time). The explicit cost is $5 for materials. The implicit cost is $4, as Walter could earn $8 per hour, and it takes him 0.5 hours to build a birdhouse. Therefore, the total cost is $9 ($5 + $4). Selling the birdhouse for $20, the profit is $20 - $9 = $11.

Scenario 13-11 Walter Builds Birdhouses. He Spends $5 on the Materials for Materials