Question

What does it cost to make 100 pairs of running shoes? An Asian manufacturer of running shoes pays its workers $275 to make 100 pairs an hour. Workers use company-owned equipment that costs $300 in forgone interest and economic depreciation. Materials cost $900. Which costs are explicit costs? Which costs are implicit costs? With total revenue from the sale of 100 pairs of shoes of $1,650, calculate economic profit. The costs that are explicit costs are _ . The costs that are implicit costs are O A. wages, materials, and forgone interest; economic depreciation B. wages and materials; forgone interest and economic depreciation O c. forgone interest and economic depreciation; wages and materials OD. wages and forgone interest; materials and economic depreciation If the total revenue from the sale of 100 pairs of shoes is $1,650, the manufacturer's economic profit is $ .

Answer 1

Explicit cost are the monetary expenses.

Therefore, explicit cost are wages ($275) and materials ($900)

Implicit cost are the opportunity cost of using the resources.

Therefore, implicit cost are forgone interest and depreciation of $300.

Answer: Option (B)

Economic profit = Total Revenue - Explicit cost - Implicit Cost

Economic profit = $1650 - ($275 + $900) - $300

Economic profit = $1650 - $1175 - $300

Economic profit = $175

The manufacturer's economic profit is $175