Question

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The explicit costs of Harvey's firm in the first year were

Answer 1

The explicit costs of Harvey's firm in the first year were $605,000

Step-by-step explanation:

According to the given data we have the following:

In the first year, the firm sold 11,000 units of software

$55 goes for the costs of production, packaging, marketing, employee wages and benefits

Therefore, in order to calculate explicit costs of Harvey's firm in the first year we would have to make the following calculation:

explicit costs of Harvey's firm= units of software sold*costs of production, packaging, marketing, employee wages and benefits

explicit costs of Harvey's firm=11,000*$55

explicit costs of Harvey's firm=$605,000

The explicit costs of Harvey's firm in the first year were $605,000