Opportunity Cost

Opportunity Cost - payments if he were to lease his rig to...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Burton’s explicit costs are: $18,000 in fuel, maintenance, etc. His implicit costs are: $15,000 of foregone payment for truck leasing His opportunity costs are: $ 18,000 operating cost +$15,000 of foregone payment= $33,000 total cost. Burton’s explicit cost for driving and maintaining his own rig is $18K per month for fuel, maintenance, etc. Explicit cost is the monetary opportunity cost that is used by a person to use market-supplied resources. Burton’s implicit cost for operating his own rig would be $5k that he would forgo in salary if he was employed by a trucking firm. Burton could also save $18K in operating cost and make $15k in
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: payments if he were to lease his rig to another trucker. I would recommend that Burton lease out his rig for $15k per month which would more than double the amount he would make operating his own rig while paying $18,000 in operating cost out of $25,000 with $7,000 left over for his profit. This plan would also prove beneficial for Burton considering he would only make $5,000 in salary if he was employed by a trucking firm. Reference Thomas, C. & Maurice, S. (2011). Managerial economics : Foundations of business analysis and strategy (10th ed.). New York: McGraw-Hill...
View Full Document

This note was uploaded on 07/07/2011 for the course BUSINESS 350 taught by Professor Mitchell during the Fall '09 term at Troy.

Ask a homework question - tutors are online