Answer to Question #52910 in Microeconomics for Yana

Question

Explain answer you choose:
Sam quits his job as an airline pilot and opens his own pilot training school. He was earning BAM
40,000 as a pilot. He withdraws BAM 10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for BAM 5,000 per year. He rents a computer for BAM 1,200, buys office supplies for BAM 500, rents an airplane for BAM 6,000, pays BAM 1,300 for fuel and maintenance, and hires one worker for BAM 30,000. Sam's total revenue from pilot training classes this year equaled BAM 90,400. Sam's explicit costs this year equals:
a. BAM 84,400.
b. BAM 39,000.
c. BAM 55,000.
d. BAM 45,600.
e. BAM 40,000.

Answer 1

If Sam was earning BAM 40,000 as a pilot, if he withdraws BAM 10,000 from his savings where he was earning 6 percent interest and uses the money in his new business, uses a building he owns as a hanger and could rent it out for BAM 5,000 per year, rents a computer for BAM 1,200, buys office supplies for BAM 500, rents an airplane for BAM 6,000, pays BAM 1,300 for fuel and maintenance, and hires one worker for BAM 30,000, and if Sam's total revenue from pilot training classes this year equaled BAM 90,400, then Sam's explicit costs this year equals: Explicit Costs = 1,200 + 500 + 6,000 + 1,300 + 30,000 = 39,000, so the right answer is:
b. BAM 39,000.