# Economics

posted by on .

When Burton Cummings graduated with honors from the Canadian Trucking Academy, his father gave him a \$350,000 tractor-trailer rig. Recently, Burton was boasting to some fellow truckers that his revenues were typically \$25,000 per month, while his operating costs (fuel, maintenance, and depreciation) amounted to only \$18,000 per month. Tractor-trailer rigs identical to Burton’s rig rent for \$15,000 per month. If Burton was driving trucks for one of the competing trucking firms, he would earn \$5,000 per month. Burton is proud of the fact that he is generating a net cash flow of \$7,000 (\$25,000 - \$18,000) per month, since he would be earning only \$5,000 per month if he were working for a trucking firm.

1)Compute both Burton Cummings’s explicit costs per month and his implicit costs per month.
2)Compute the opportunity cost of the resources used by Burton Cummings each month.

• Economics - ,

1.Burton Cummings’s explicit costs per month = \$18000

2.Opportunity cost = If he would have rented it , he would have earned \$15,000 + Gain in not spending the \$18,000 on maintenance + \$5000 that he would have earned by himself driving for one of the competing firms, which totals to \$38,000