Answer and Explanation:
a. Explicit costs are actual costs incurred by the venture.
In this case those are;
= Annual lease on building + Payments to workers + Utilities (electricity, water, disposal) costs
= 22,000 + 120,000 + 8,000
= $150,000
b. Implicit costs are the opportunity costs (revenue foregone by not choosing other alternatives).
= Entrepreneur's potential earnings as a salaried worker + Entrepreneur's potential economic profit from the next best entrepreneurial activity + Entrepreneur's forgone interest on personal funds used to finance the business
= 50,000 + 80,000 + 6,000
= $136,000
c. Economic costs
= explicit + implicit costs
= 150,000 + 136,000
= $286,000
d. Accounting profit
= Revenue - explicit costs
= 380,000 - 150,000
= $230,000
e. Economic Profit
= Revenue - economic costs
= 380,000 - 286,000
= $94,000
f. New Accounting Profit
= Revenue - explicit costs
= 286,000 - 150,000
= $136,000
New Economic profit
= Revenue - economic costs
= 286,000 - 286,000
=$0
