The Accompanying Table Outlines the Explicit and Implicit Costs Incurred

question 70

Essay

The accompanying table outlines the explicit and implicit costs incurred by a small graphic design company in France that takes in annual revenues equal to $250,000. $\begin{array}{ll}\text { Explicit Costs }\\\text { Office Rent } & \$ 2,000 / \text { month } \\\text { Utilities } & \$ 200 / \text { month } \\\text { Computers } & \$ 1,000 / \text { month } \\\text { Labor } & \$ 5,000 / \text { month }\\\text { Implicit Costs }\\\text { Forgone Wages } & \$ 55,000 / \text { year } \\\text { Forgone Interest on Initial Investment } & \$ 5,000 / \text { year }\end{array}$
a. What would this company's accounting profits equal for a year?
b. What would this company's economic profits equal for a year?
c. What would we expect to happen in the long run for this market? Why?

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Definitions:

Gross Investment

Refers to the total amount of money invested in the creation of new capital assets in an economy within a specific time period, without deducting depreciation.

Corporate Taxes

Taxes imposed on the income or profit of corporations by the government.

Mortgage Interest Rates

The percentage charged on a mortgage loan, influencing the affordability and demand for real estate.

Housing Starts

The number of new residential construction projects that have begun during any particular month.