I need an answer for this please 2. One year ago, Ms. Moffat and Mr. Spieder ope

Question

I need an answer for this please

2. One year ago, Ms. Moffat and Mr. Spieder opened a cheese firm (called MSCF). Use the following information to calculate MSCF's explicit costs and implicit costs during its first year of operation: a. Moffat and Spieder put $70,000 of their own money into the firm b. They bought equipment for $40,000. c. They hired one employee to help them for an annual wage of $18,000. d. Moffat gave up her previous job, at which e. Spieder kept his old job, which paid $20 an f. MSCF bought $5,000 of goods from other she earned $22,000, and spent all her time working for MSCF hour, but gave up 20 hours of leisure each week (for 50 weeks) to work for MSCF firms. end of the year was $37,000. g. The market value of the equipment at the

Explanation / Answer

Implicit Cost is the Opportunity Cost that Moffat sacrificed in order to establish the firm.

Moffat gave up her job = $22,000

She also sacrificed 20 hours of leisure for 50 week i.e 1000 hours @ $20/hours = $20,000.

Hence, the Total Implicit Cost would be $22,000 + $20,000 = $ 42,000

Explicit Cost:- It is a cost incurred to set up the firm which includes:-

Firm Setup = $70,000

Equipment =$40,000

Employee Salary = $ 18,000

Goods = $5,000

Total = $123,000.

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