Question

Pam runs a hot dog cart at the sports stadium. Pam has no​ skills, no job​ experience, and no alternative employment. Entrepreneurs in the hot dog cart business earn ​$20,000 a year. Pam pays the rent of ​$500 a​ year, and her total revenue is ​$16,000 a year. She borrowed ​$1,100 at 10 percent a year to buy equipment. At the end of one​ year, Pam was offered ​$1,000 for her business and all its equipment. Pam explicit cost are ____.

Answer 1

$610

Step-by-step explanation:

Explicit costs are the costs that are made to operating some of the business activities such as salary or wages, rent, purchasing material.

Therefore,

Explicit Cost = Rent Payment + Interest payment for $1,100 at 10%

= $500 + 0.10 × 1,100

= $500 + $110

= $610

Therefore, Pam explicit cost are $610.