Question

1. Definition of economic costs Edison lives in Dallas and runs a business that sells boats. In an average year, he receives $842,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $452,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $38,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Edison does not operate this boat business, he can work as an accountant, receive an annual salary of $48,000 with no additional monetary costs, and rent out his showroom at the $38,000 per year rate. No other costs are incurred in running this boat business. Identify each of Edison'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 Edison pays the manufacturer The rental income Edison could receive if he chose to rent out his showroom The wages and utility bills that Edison pays The salary Edison could earn if he worked as an accountant Complete the following table by determining Edison's accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit

Answer 1

The hhlesali cost om th boas that Edison eas t manuaoe xplicit Cort untal moma Edison could pacaive t The Chok to unt out Jis shownoom - The Wag und utility. Usthoffdison p Explüit Cost The Salaw Edigon couldd eas f ntourd t na profit Revenue Economic pofQeveno ücit cost mpUcit Cosf (4000)-(432000) -(301poo) (38,oo) C4000) 300