Homework: Chapter 11, Assignment 2 Score: 0 of 1 pt Concept: Implicit Costs Sav

Question

Homework: Chapter 11, Assignment 2 Score: 0 of 1 pt Concept: Implicit Costs Sav 17 of 25 (11 complete) HW Score: 40%, 10 of 25 p Question Help Charies has decided to open a lawn-mowing company. To do so, he purchases mowing equipment for $4,000, buys gasoline ($2.00 in gas is required to mow each yard), and pays a helper $15.00 per yard. Prior to opening the lawn company, Charles earned $7,000 as a lifeguard at the neighborhood swimming pool. Assume the money he used to purchase the mowing equipment could otherwise have earned 2 percent per year in the bank and that the mowing equipment depreciates at 10 percent per year Charles plans to mow 500 yards per year What is Charles's implicit cost of production? Charles's implicit cost of production is s per year (Enter your response as an integer)

Explanation / Answer

Implicit cost are the opportunity cost:

Here two Opportunity cost is there:

1) wage = $7000

2) interest foregone = $4000*(1+0.08) -4000 = 320

Implici cost = $(7000+320) = $7320

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