Question

Suppose a firm has the following expenditures per day: $240 for wages, $150 for materials, and $80 for equipment rental. The owner of the firm owns the building in which it operates. If the firm were not operating in the building, he could rent the building for $70 per day. Total daily revenue is $600.

Answer 1

Answer: This question is incomplete, so in order to answer it, we must first complete the question. What we are looking for is the daily explicit costs made by the firm in the question above.

The total daily explicit cost is $470.

Explanation:

Explicit costs are the costs that are incurred by a firm in the course of running a business. This simply means the payments that a firm makes to others during a production cycle. These costs include wages, rent, purchase if materials, utilities, and anything that the firm must make payments for.

In the question above, we can list out the costs incurred by the firm as follows:

Wages ---------------- $240

Materials ------------- $150

Equipment rental -- $80

Total explicit costs incurred is therefore,

240+150+80

= $470.