Question

Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. Reference: Ref 9-18 (Scenario: Betty's Cookie Shop) Betty's implicit and explicit costs are equal to:

A. $80,000.
B. $184,500.
C. $100,000.
D. $204,500.

Answer 1

Betty's implicit and explicit costs are equal to

D. $204,500.

Step-by-step explanation:

• Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. Reference: Ref 9-18 (Scenario: Betty's Cookie Shop) Betty's implicit and explicit costs are equal to:

• D. $204,500.