Purchase Solution

Analyzing the Explicit and Implicit Costs

Not what you're looking for?

Ask Custom Question

1.
It is estimated that over 100,000 students will apply to the top 30 M.B.A. programs in the United States this year.
a. Using the concept of net present value and opportunity cost, explain when it is rational for an individual to pursue an M.B.A. degree.
b. What would you expect to happen to the number of applicants if the starting salaries of managers with M.B.A. degrees remained constant but salaries of managers without such degrees increased by 20 percent? Why?

2.
Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that manufactures a line of special pens for personal digital assistants. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.
a. If Jamie decides to embark on her new venture, what will her accounting costs be during the first year of operation? Her implicit costs? Her opportunity costs?
b. Suppose that Jamie's estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? Positive economic profits?

7.
You are the manager of a firm that receives revenues of $40,000 per year from product X and $90,000 per year from product Y. The own price elasticity of demand for product X is -1.5, and the cross-price elasticity of demand between product Y and X is 1.8. How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 2 percent?

Purchase this Solution
Solution Summary

There are 3 problems. Solutions provide answers to the given problems with suitable explanations and workings.

Solution Preview

1.
It is estimated that over 100,000 students will apply to the top 30 M.B.A. programs in the United States this year.

a. Using the concept of net present value and opportunity cost, explain when it is rational for an individual to pursue an M.B.A. degree.

Benefits of attending MBA program
1. Higher expected salary
2. Value of prestige associated and work environment

Costs of attending MBA program
1. Cost of books, tuition and other fees
2. Opportunity Costs (We can make some money by working somewhere if we choose not to go for MBA)

Net present value of MBA program would be equal to present value of benefits minus the present value of opportunity costs involved. It is advisable to join any MBA program if net present value if greater than zero.

b. What would you expect to happen to the number of ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • Business and Economic profits

    Normal Return on Investment is the implicit costs i.e. $25000 The solution calculates implicit costs, explicit costs, economic profits and normal profits in the given case.

  • Implicit and Explicit costs

    You begin by listing the club's explicit costs and implicit costs and then make a recommendation whether ticket prices should cover the explicit costs, the implicit costs, or both explicit and implicit costs.

  • Explicit and Implicit cost

    The solution explains the concept of explicit and implicit costs through a example.

  • Explicit Cost, Implicit Cost or Not Needed to Be Reflected

    What is his explicit and implicit cost. I know that the (5% of 2000) is implicit cost. $30000 + (10% of 3000) is the explicit cost. However i am confuse. Do i need to add the cost of the machine of $5000 to explicit or implicit cost?

  • Microeconomics: Variable, Fixed, Explicit and Implicit costs

    321174 Microeconomics: Variable, Fixed, Explicit and Implicit costs A firm's costs can be divided into fixed costs and variable costs. Identify each of the following as either a fixed or variable cost.

  • Calculating the accounting and economic costs

    Total Implicit costs = Rent that could been earned = $800 Total economic costs = Total explicit costs + Total implicit costs = $800 + $800 = $1600 Total accounting costs = Total explicit costs = $800 Economic costs include the opportunity costs

  • Calculating Implicit and Explicit Costs

    Solution describes the steps to calculate implicit costs, explicit costs, accounting profit and economic profits in the given case in 198 words.

  • Price elasticity of demad, determinants of elasticity

    A firm with total revenues of $150 million, explicit cost of $90 million, and implicit costs of $30 million b. A firm with total revenue of $125 million, explicit costs of $100 million, and implicit costs of $30 million c.

  • explicit cost or an implicit cost

    Rent of the electricity meter is fixed and the rest of the cost is variable. This solution assesses the examples as explicit costs or implicit costs.

  • distinguish between explicit & implicit costs

    366059 Distinguish between explicit & implicit costs 1- what is the law of diminishing returns? Give discriptive example? 3- distinguish between explicit & implicit costs, giving example of each.

View More Related Solutions