1. Definition of economic costs Kevin lives in Dallas and runs a business that s
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1. Definition of economic costs Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit 1. Definition of economic costs Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit 1. Definition of economic costs Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Implicit Cost Explicit Cost Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit Complete the following table by determining Kevin’s accounting and economic profit of his boat business. 1. Definition of economic costs Kevin lives in Dallas and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kevin does not operate this boat business, he can work as an accountant, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $3,000 per year rate. No other costs are incurred in running this boat business. Identify each of Kevin’s costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Kevin pays the manufacturer The rental income Kevin could receive if he chose to rent out his showroom The wages and utility bills that Kevin pays The salary Kevin could earn if he worked as an accountant Complete the following table by determining Kevin’s accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic ProfitExplanation / Answer
Implicit cost are opportunity cost (sacrifice) and explicit costs are direct cost.
1. wholesale cost= explicit
2.rental income=3000= implicit
3.wages and bill =explicit
4.salary as accountant= implicit
Accounting profit =revenue- explicit cost
= 704000-404000-286000
=14000$
Economic profit=accounting profit - implicit cost
=14000 - 3000-20000
= - 9000 $
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