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Exploring Economics 7th Edition

Exploring Economics (7th Edition)

Book Edition7th Edition
PublisherCengage Learning
Section 11.1: Firms and Profits: Total Revenues Minus Total Costs
Section 11.2: Production in the Short Run
In Text Question
Figure Question
Section 11.3: Costs in the Short Run
In Text Question
Section 11.4: The Shape of the Short-Run Cost Curves
In Text Question
End of Chapter
Chapter 11, Section 11.1, Figure Question, Exercise 01
Page 288


What explicit and implicit costs might the owner of this salon incur? His explicit costs include chairs, rent for the shop, scissors, the rinse sinks, electricity, blow dryers, and so on. The implicit costs include the salary he could make at another job or the leisure he could enjoy if he retired.


(A) Explicit cost (the financial cost that could be directly traced back to the operation of the saloon)

  1. cost of the hair products for use on the customers
  2. utilities for running the shop (electricity, water)
  3. cost of advertising (online and offline)
  4. cost of buying hair-styling tools and replacement
  5. insurance for the business premise
  6. salary of the stylists
  7. rental of the business premise (if it is rented)

(B) Implicit cost ( the opportunity cost of running the saloon; the next best alternatives foregone)

  1. the interest income from the bank if the money required for setting up saloon were to be put in the bank
  2. the potential income from the high-paying manager job had the saloon owner not open the saloon
  3. potential investments in the high-performing indexes and stocks using the funds to open the saloon
  4. the high income from another business. 


The attempt is as follow : 

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