Question

Explain a musician’s short-run vs. long-run trade-off in terms of costs and rational decision- making.

How long do you think the "long-run" is for a hip-hop musician (give your answer as a number of months or years)? How long do you think a hip-hop musician would be willing to struggle along in the industry without "making it" before they quit and get an office job? Explain your answer by referencing the implicit costs and opportunity costs of this job.

Answer 1

A different ways of thinking for a hip-hop musician if musician will do office job for five year he will give his time to job that are motivated to earn profit for the organisation implicit cost and opportunity cost of this job will different about cost and profit

Following are the key points-

1. private owned firms are motivated to earn profit. profit is the differnce between cost and revenues if musician is do private enterprise is the ownership of business by private individual.

2. Impicit cost for the job are the opportunity cost of resoureces already owned by firm and used in business- for example expanding a factory onto land already owned.

3. Instead of doing job a musician will start his own business for a muscian his skill is the land the team of musician is required that is the opportunity cost for the musician and the skill is the implicit cost.

Implicit costs are more sutable but just as important they represent the opportunity cost of using resources already owned by the firm. Often for small business they are resources contributed by the owners- for example, working in the business while not getting a formal salary or using the ground floor af a home as a office area. Implicit costs also allow for depriciation fo good, material, and equiment that are necessary for a company to operate.

These two cost are improtant for distinguishing between two conceptions of profit- accounting profit and ecomonic profit.