Answer:
The yearly economic cost for Fred's accounting business is $142,000.
Explanation:
Economic costs include both the explicit costs and the implicit costs.
Explicit costs are the expenditure on factors of production purchased from outsiders.
Implicit costs are the opportunity cost of owner provided resources.
Other expense is an explicit cost.
Foregone salary and foregone rent are the implicit costs.
So,
Economic cost = Foregone salary + Foregone rent + Other expenses
Economic cost = $95,000 + $22,000 + $25,000 = $142,000
Thus,