Question

Marcie started a consulting firm, she is using an office building she used to rent for $60,000/year as her office. She purchased computers and other equipment for $25,000 and spent $20,000 on marketing and advertising. She also hired an assistant for $30,000/year and her other expenses such as utilities are $15,000. If Marcie worked for another firm, she would earn $100,000. Her revenue for the year were $150,000. Marcie’s implicit cost based on the information above is:

Answer 1

Answer:

Working for the firm is the best option for Marcie.

Explanation:

Option 1

The implicit value of Marcie is the benefits lost due to his working for a firm.

The implicit cost includes $60,000 of rentals lost, purchase of equipment for $25,000, expenditure of $20,000 on marketing, assistant salary of $30,000 per year and other expenses of $15,000. The revenue that the firm generate is $150,000.

The net benefit = Revenue - Implicit cost

The net benefit  = $150,000 - ($60,000 + $25,000 + $20,000 + $30,000 + $15000) = Zero

Option 2

The other option is working for a firm which generates $100,000 in value.

This means the best option here for Marcie is option 2.