Answer:
Explicit costs is $150,000
Explanation:
The task is to compute total explicit costs in the year which is also the accounting profits:
Annual lease on building $22,000
Payment to workers $120,000
Utilities $8000
Total explicit costs $150,000
The following costs are not included because they are implicit costs:
Entrepreneur's potential earnings as a salaried worker $50,000
Value of entrepreneur’s talent in the next best entrepreneurial activity $80,000
Entrepreneur’s forgone interest on personal funds used to finance the business $6,000
Implicit costs are cash from an opportunity cost perspective,which are the benefits forgone because the entrepreneur chose to run a business rather than engage in something else.
