Final answer:
The most fitting cost equation from the provided options for Tony and Erica's law firm is Option B (C(x) = 10,000 + 500x), which includes a fixed cost and a variable cost per unit. However, the fixed cost in the option does not match the calculated explicit cost of $85,000.
Step-by-step explanation:
Determining the Law Firm's Cost Equation
To find the correct equation for the costs of Tony and Erica's law firm, let's start by calculating their explicit costs. Adding the office rental of $50,000 to the law clerk's salary of $35,000, we find that the total explicit costs amount to $85,000. This cost is a fixed amount and does not vary with the number of cases or clients they handle.
Next, when considering their revenue of $200,000, we subtract the explicit costs ($85,000) from the revenue to calculate the accounting profit, not yet considering potential implicit costs.
The correct cost equation would include a fixed cost component representing these explicit costs, and potentially, a variable cost component if additional costs that depend on the volume of the work performed (x) are present. Reviewing the options provided:
- (A) C(x) = 10,000x + 500
- (B) C(x) = 10,000 + 500x
- (C) C(x) = 10,500 + 2,500x
- (D) C(x) = 10,500x + 2,500
Given the information, Option B is the most fitting equation. This option represents a fixed cost of $10,000 (which could be a mistake since we calculated $85,000 as the fixed cost from the provided data) and a variable cost of $500 for each unit of x, which might represent the variable costs per case or client.