Subject: Economics    / General Economics   
Question

When Burton Cummings graduated with honors from Canadian Trucking Academy, his father gave him $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 the 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.

a. How much are Burton Cumming's explicit cost per month? How much are his implicit cost per month?

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

c. 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 earning only $5,000 per month if he were working for a trucking firm. What advice would you give Burton Cummings?