Micro Economics For Today
Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
Question
Chapter 7, Problem 1SQP

(a)

To determine

Identify the implicit cost and explicit cost.

(a)

Expert Solution
Check Mark

Explanation of Solution

Manager’s salary is an explicit cost because salary is a direct cost that is involved in the process of running a business.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(b)

To determine

Identify the implicit cost and explicit cost.

(b)

Expert Solution
Check Mark

Explanation of Solution

Payment to Dell for computers is an explicit cost because this cost involves in spending money.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(c)

To determine

Identify the implicit cost and explicit cost.

(c)

Expert Solution
Check Mark

Explanation of Solution

Salary forgone by the owner of a firm by operating his or her own company is an implicit cost because the person gives up his work in order to start his own business. Since the salary is given up for benefit, it is an implicit cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(d)

To determine

Identify the implicit cost and explicit cost.

(d)

Expert Solution
Check Mark

Explanation of Solution

Interest forgone on a loan that an owner makes to his or her own company is an implicit cost because the person would earn the interest payment if he lent the amount outside the business. Thus, he has given up his interest rate.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

(e)

To determine

Identify the implicit cost and explicit cost.

(e)

Expert Solution
Check Mark

Explanation of Solution

Medical insurance payment that a company makes for its employees is an explicit cost because it involves spending the money directly.

Economics Concept Introduction

Explicit cost: Explicit cost refers to a direct cost incurred by the firm to others in the process of running a business such as wages, rents, materials, and so on. Thus, fixed cost and variable cost are included in the explicit cost.

(f)

To determine

Identify the implicit cost and explicit cost.

(f)

Expert Solution
Check Mark

Explanation of Solution

Income forgone while going to college is an implicit cost because the person has given up his income for going to college. Thus, there is a fall in the opportunity cost.

Economics Concept Introduction

Implicit costs: Implicit cost refers to the costs that have previously been incurred but are not initially shown as a separate expenditure. It denotes an opportunity cost that arises when a firm allocates internal resources.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Recommended textbooks for you
  • Micro Economics For Today
    Economics
    ISBN:9781337613064
    Author:Tucker, Irvin B.
    Publisher:Cengage,
    Survey Of Economics
    Economics
    ISBN:9781337111522
    Author:Tucker, Irvin B.
    Publisher:Cengage,
    Economics For Today
    Economics
    ISBN:9781337613040
    Author:Tucker
    Publisher:Cengage Learning
  • Managerial Economics: A Problem Solving Approach
    Economics
    ISBN:9781337106665
    Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
    Publisher:Cengage Learning
    Microeconomics: Principles & Policy
    Economics
    ISBN:9781337794992
    Author:William J. Baumol, Alan S. Blinder, John L. Solow
    Publisher:Cengage Learning
    Essentials of Economics (MindTap Course List)
    Economics
    ISBN:9781337091992
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
  • Micro Economics For Today
    Economics
    ISBN:9781337613064
    Author:Tucker, Irvin B.
    Publisher:Cengage,
    Survey Of Economics
    Economics
    ISBN:9781337111522
    Author:Tucker, Irvin B.
    Publisher:Cengage,
    Economics For Today
    Economics
    ISBN:9781337613040
    Author:Tucker
    Publisher:Cengage Learning
    Managerial Economics: A Problem Solving Approach
    Economics
    ISBN:9781337106665
    Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
    Publisher:Cengage Learning
    Microeconomics: Principles & Policy
    Economics
    ISBN:9781337794992
    Author:William J. Baumol, Alan S. Blinder, John L. Solow
    Publisher:Cengage Learning
    Essentials of Economics (MindTap Course List)
    Economics
    ISBN:9781337091992
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning