The Costs of Your Business

Econ 2302
Name: Shaun Anderson Date: 04/15/2020

Think about your business model developed for your Entrepreneurship. Answer the
following questions about the costs of your business. Be sure to use your imagination
and be creative about your costs.

Submit the assignment, via Dropbox on eCampus.

1. What is your business? Answer: Selling Tacos.

2. What is a ‘fixed cost?’: Answer: A fixed cost is a cost that doesn’t change no
matter the quantity of goods or services provided increases or decreases.
3. What are some fixed costs of your business?: Answer: Utility costs, Rent,
Property Taxes.
4. What is a ‘variable cost?’: Answer: A variable cost is a cost that changes
depending on the quantity of goods or services provided increases or
decreases.
5. What are some variable costs of your business? Answer: Advertising,
Bonuses, Delivery/Shipping costs.
6. What is an ‘implicit cost?’ Answer: Costs NOT paid for in monetary outlays.
7. What are some implicit costs of your business? Give some examples of all types
of the implicit costs we discussed: foregone earnings, normal profit, foregone
interest, and depreciation. Answer: When placing the net earnings such as
foregone earnings and normal profit, the implicit cost of having interest in
the bank account is the cost of doing business. Foregone interest and
depreciation are also the subsidiary costs of doing business through
leasing equipment, building space, ect.
8. What is a ‘marginal product?’ Answer: Marginal product is the additional
output created from additional inputs placed into the company.
9. What might cause the marginal product of your employees to diminish in this
business? Answer: Better opportunities at other businesses whether that be
higher hourly salary or more hours.
10. What is a ‘marginal cost?’ Answer: Marginal Cost is the cost added by
producing one more unit of a product or service.
11. What are some marginal costs of the business? Answer: The cost of preparing
the next batch of meats for customers, the cost of leaving the business
open for additional hours, ect.
12. What is the difference between short-run planning and long-run planning?
Answer: Short-run has no particular time period while Long-run involves a
time frame in which all factors of production are variable.
13. What are some of your short-run planning issues? Answer: How efficient
production equipment is, ensuring employees are comfortable working for
us, the next week’s costs of delivering foods and shipping costs.
14. What are some long-run planning you are doing for the business? Answer: The
annual cost of running the building space, differentiation in season profits
and how that affects the current outlook on sales.
15. What might cause you to reach diseconomies of scale—something you do NOT
want to happen? Answer: A prime example of this can be the current
pandemic COVID-19 that is affecting all types of dining in businesses. The
loss of customers is devastating for business and carry-out alone has
severely decreased sales over the past few months. Having a situation like
this arise would be brutal for our company and something that would most
likely result in the business closing down unless we find new and better
methods of retaining and increasing profits.