Answer:
a. $56,400
b. 101,750
c. Economic loss of $108,150
Explanation:
a.
Explicit Cost
The direct payments made to other for different purposes s explicit cost. Such as wages, rent etc.
For Roma Explicit costs are
Computer $55,000
Printer lease payment $150
Paper, utilities, & postage <u>$1,250 </u>
Total Explicit Cost $56,400
b.
Implicit Cost
Any opportunity cost is the implicit cost. The loss of benefit which someone faces for choosing an alternative.
For Roma Explicit costs are
School Teacher Salary $40.000.
Building rent $55,000
Bank Interest (5% 55,000) $2,750
Computer offer <u>$4,000</u>
Total Implicit cost $101750
c.
Economic Profit
Economic Profit is the net of Revenue / Income less Implicit and Explicit costs associated with the revenue / Income.
Economic Profit / loss = Total Revenues - (Explicit Costs + Implicit Costs)
Economic Profit / loss = $50,000 - ($56,400 + 101,750)
Economic Loss = $108,150
