The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $40,000Annual lease on building = $25,000Annual revenue from operations = $420,000Payments to workers = $150,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's total economic costs are

A) $309,000.
B) $183,000.
C) $111,000.
D) $189,000.

Question

Isaiah Brown · Accepted Answer

Final Answer : A, Explanation :  Total economic costs include both explicit and implicit costs. Explicit costs are $25,000 (lease) + $150,000 (workers) + $8,000 (utilities) = $183,000. Implicit costs are $40,000 (forgone salary) + $80,000 (next best entrepreneurial activity) + $6,000 (forgone interest) = $126,000. Total economic costs = $183,000 + $126,000 = $309,000.

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