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Dollar amount of the opportunity cost

When Burton Denson graduated with honors from the American Trucking Academy, his father gave him a $350,000 tractor-trailer rig. Recently, Burton was boasting to some fellow truckers that his revenues were typically $25,000 per month, while his expenses (fuel, maintenance, and depreciation) amounted to only $18,000 per month. Tractor-trailer rigs identical to Burton's rent for $15,000 per month. If Burton was driving for one of the competing trucking firms, he would earn $5,000 per month.
a- How much are Burton's explicit costs per month? How much are his implicit costs per month?
Your Answer:

b- What is the dollar amount of the opportunity cost of the resources used by Burton each month?
Your Answer:

c- Burton is proud of the fact that he is generating a net cash flow of $7,000 per month, since he would be earning only $5,000 per month if he were working for a trucking company. What advice would you give Burton?

Solution Preview

When Burton Denson graduated with honors from the American Trucking Academy, his father gave him a $350,000 tractor-trailer rig. Recently, Burton was boasting to some fellow truckers that his revenues were typically $25,000 per month, while his expenses (fuel, maintenance, and depreciation) amounted to only $18,000 per month. Tractor-trailer rigs identical to Burton's rent for $15,000 per ...

Solution Summary

Dollar amount of the opportunity cost is determined.

$2.19