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. The explicit cost for one birdhouse is

Question

Quizplus · Accepted Answer

The explicit cost for one birdhouse is the cost of materials, which is $5 according to the scenario.

The best choice for Walter would depend on his goals and preferences. However, if he wants to maximize his profit, he should consider his opportunity cost. His time spent building birdhouses could be spent working at the hardware store and earning $8 per hour. Therefore, his opportunity cost for building one birdhouse is $4 (30 minutes = 0.5 hours, $8 per hour x 0.5 hours = $4).

To calculate his profit per birdhouse, we can subtract his explicit cost ($5) and opportunity cost ($4) from his revenue ($20): $20 - $5 - $4 = $11.

Therefore, the best choice for Walter would be to continue building birdhouses as long as he is able to sell them for at least $11 each, as this would result in a profit.

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