Answer to Question #126142 in Macroeconomics for Amjad

Question

a) Let a doctor earns $20 per hour, a plumber $ 5 per hour, and a professor $ 10 per hour. Everything else the same, which one will devote more hours to negotiating the price of a new car? Explain

b) What is the full cost (direct cost +opportunity) of pursuing BBA from IMSciences? Impose appropriate assumptions if exact value(s) of item(s) is/are not available.

Answer 1

A)

The time value is different for the three individuals. The doctor values their time at 20$ per hour, the plumber at 5$ per hour, and the professor at 10$ per hour. That implies that the more time an individual spends on negotiations, the more the loss they incur regarding money earned. So, the plumber who attains the lowest will spend maximum time negotiating as his time is well worthless to him compared to the others.

B)

Direct costs are related to producing a good or service. A direct cost includes raw materials, labor, and expense or distribution costs associated with producing a product.

An implicit cost is any cost that has already occurred but not necessarily shown or reported as a separate expense. It represents an opportunity cost that arises when a company uses internal resources toward a project without any explicit compensation for the utilization of resources.