Question

William, a journeyman carpenter with an​ associate's degree in civil​ engineering, had been making ​$33 comma 475 per year as a carpenter for a building contractor. As a​ self-employed subcontractor, William incurred explicit costs of ​$265 comma 000 per year. What is​ William's economic​ cost? His economic cost is ​$ nothing per year. ​ (round your answer to the nearest​ penny)

Answer 1

Answer:

$265,000

Explanation:

Economic cost is the addition of implicit cost and explicit cost. That is,

Economic cost = Explicit cost + Implicit cost .............. (1)

Explicit costs are payments that are actually made. It is also known as out-of-pocket costs.

Implicit cost is an implied cost because they are not actually paid. Implicit cost is a loss of income, but a loss of profit. An example is an opportunity cost.

Since we are not given implicit cost in the question, equation (1) is estimated as follows:

Economic cost = ​$265,000 + 0 = $265,000

Therefore, William's economic​ cost is equal to his explicit cost of $265,000.