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Question: When Burton Cummings graduated with honors from the Canadian Trucking Academy, his father gave him a exist350,000 tractor-trailer rig. Recently, Burton was boasting to some fellow truckers that his revenues were typically exist25,000 per month, while his operating costs (fuel, maintenance, and depreciation) amounted to only exist18,000 per month. Tractor-trailer rigs identical to Burton's rig rent for exist15,000 per month. If Burton was driving trucks for one of the competing trucking firms, he would earn exist5,000 per month.

a. How much are Burton Cummings's explicit costs per month? How much are his implicit costs per month?

b. What is the dollar amount of the opportunity cost of the resources used by Burton Cummings each month?

c. Burton is proud of the fact that he is generating a net cash flow of exist7,000 (= exist25,000 -exist18,000) per month, since he would be earning only exist5,000 per month if he were working for a trucking firm. What advice would you give Burton Cummings? WHY?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92583478

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