Question

Econ Keview ine Nature ana runcIon o1 Proauct markets Unit 4: Behind the Supply Curve: Profit, Production, and Costs Chapters: 21 & 22 1.) Karma and Don run a furniture-refinishing business from their home. Which of the following represent an explicit cost of the business and which represent an implicit cost? supplies such as paint stripper, varnish, polish, sandpaper, and so on а. b basement space that has been converted into a workroom C. wages paid to a part-time helper d. a van that they inhented and use only for transporting furniture the job at a larger furniture restorer that Karma gave up in order to run the business е. 2) Suppose you are in business eaming an accounting profit of $25,000 What is your economic profit if the implicit cost of your capital is $2,000 and the opportunity cost of your time is $23,000? Explain your answer. a. What does your answer to part A tell you about the advisability of devoting your time and capital to this business? b. 3) Suppose a firm can sell as many units of output as it wants for a price of $15 per unit and faces total costs as indicated in the table below. Use the optimal output rule to determine the profit-maximizing level of output for the firm. TC 0 $2 10 20 3 33 50 71 4 5 4) Use the data from the above question to graph the firm's MC and MR curves and show the profit-maximizing level of output 1 of 5

Answer 1

1) An explicit cost is out of pocket cost such as payment of wages and salaries. Implicit costs are the opportunity cost of the resources already owned by the business, for example expanding an already owned factory.

the following businesses are ned en The cost represented by (a) Explicit (6) Implicit © Explicit (d) Implicit (C) Implicit

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