Problem: When Burton Denson graduated with honors from the American 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 expenses (fuel, maintenance, and depreciation) amounted to only $18,000 per month. Tractor-trailer rigs identical to Burton's rent for $15,000 per month. If Burton was driving for one of the competing trucking firms, he would earn $5,000 per month.
1) How much are Burton's explicit costs per month? How much are his implicit costs per month?
2) What is the dollar amount of the opportunity cost of the resources used by Burton each month?
3) Burton is proud of the fact that he is generating a net cash flow of $7,000 per month, since he would be earning only $5,000 per month if he were working for a trucking company. What advice would you give Burton?