If a machine cost $50,000 initially and is expected to last for 20 years but is

Q: If a machine cost $50,000 initially and is expected to last for 20 years but is

The correct answer is: 3. during the first year the machine had no cost; it provides an implicit revenue of $10,000 to the firm. Explanation - An economists looks at the value of the asset in the economy. Since it is worth $10,000 more than when purchased an economist would view this as $10,000 of implicit revenue.

ID: 1095923 • Letter: I

Question

If a machine cost $50,000 initially and is expected to last for 20 years but is worth $60,000 after one year because it is in short supply, an economist most likely would say that:

1 .the machine's cost for each of its 20 years of existence is $2,500.

2. the machine's cost for each of its 20 years of existence is $3,000.

3. during the first year the machine had no cost; it provides an implicit revenue of $10,000 to the firm.

4. the value of the machine will continue to increase 20 percent per year for the next 20 years.

Explanation / Answer

The correct answer is:

3. during the first year the machine had no cost; it provides an implicit revenue of $10,000 to the firm.

Explanation - An economists looks at the value of the asset in the economy. Since it is worth $10,000 more than when purchased an economist would view this as $10,000 of implicit revenue.

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If a machine cost $50,000 initially and is expected to last for 20 years but is

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