Calculate the explicit costs of the firm

Reference no: EM13190375

During a year of operation, a firm collects $175,000 in revenue and spends $80,000 on raw materials, labor expenses, utilities and rent. The owners of the firm have provided $500,000 of their own money to the firm (and view that money as a loan to the firm) instead of investing the money and earning a 14 percent annual rate of return.
a. The explicit costs of the firm are $____. The implicit costs are $____. Total economic cost is $_____
b. The firm earns economic profit of $_____
c. If the owners could earn 20 percent annually on the money they have invested in the firm, the economic profit of the firm would be _____ ( when revenue is $175,000)

Reference no: EM13190375

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