Scenario 13-9
Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-9. Ellie's annual economic costs will equal
A)$55,200.
B)$75,200.
C)$80,500.
D)$135,700.

Question

Quizplus · Accepted Answer

Ellie's economic costs include explicit costs (office rent, equipment rental, supplies, utilities, secretary's salary) totaling $55,200, plus the opportunity costs of her foregone salary ($80,000) and lost interest from the certificate of deposit ($500), totaling $135,700.

Scenario 13-9 Ellie Has Been Working for an Engineering Firm and Earning