Andy runs a small pottery firm. in her first year she hired one helper at 12,000...

Andy runs a small pottery firm. in her first year she hired one helper at 12,000 per year, paid annual rent of $5,000 for her shop, and spent $20,000 on material. she has 40,000 of her own funds invested in equipment that could earn her $4,000 per year if alternatively invested. she had been offered $15,000 per year to work as a Potter for a competitor she estimates her entrepreneurial talents are worth $3,000 per year. total annual revenue from pottery sales is $72,000
a) what are her explicit cost?
b) what are her implicit costs?
c) what are her fixed costs?
d) what are her variable costs?

Solutions

Expert Solution

A. Explicit costs are costs that are hired by the producer from outside. Here it is the:

12000 - helper

5000- rent for shop

20000- material

B. Implicit costs are the costs that the producer inccurs through their own funds without any hiring from outside. Here it is:

40000- own funds

C. Fixed costs are the costs that remain the same and fixed throughout the year without any changes. Here it is:

40000 - which was invested at once by her and this investment will remain the same.

D. Variable costs are the costs that varies with time throughout the year.

4000

3000

72000 all the three costs are profits and sales which may surely vary accordingly to the business working.

Rahul Sunny answered 1 year ago

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