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21 August, 11:50

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:

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  1. 21 August, 12:05
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    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.
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