Suppose a grocery store's sales are 200,000 TL in one year. During this same time period, the firm paid 50,000 TL for grocery stock sold, 70,000 TL for wages and salaries, 20,000 TL on taxes and insurance, and 10,000 TL on other expenses. At the beginning of this period, the grocery store owner had received the following two offers: He could rent the store to another grocer and work for a large chain in which case he would make a return of 35 ,OOO TL during that year (including his salary). Offer II: He could have sold the store and invested in a stock which together would have yielded a return of 35,000 TL during that year, and gotten a job paying 15,000 TL. He declined both offers. a.What is the difference between explicit and implicit costs to a firm? What is the implicit cost of the business in question? b.Calculate his economic profits for the year. c.Was his decision to keep the grocery store economically rational? Explain why or why not. By referring to the relevant concepts.
Suppose a grocery store's sales are 200,000 TL in one year. During this same time period, the firm paid 50,000 TL for grocery stock sold, 70,000 TL for wages and salaries, 20,000 TL on taxes and insurance, and 10,000 TL on other expenses. At the beginning of this period, the grocery store owner had received the following two offers:
He could rent the store to another grocer and work for a large chain in which case he would
make a return of 35 ,OOO TL during that year (including his salary).
Offer II: He could have sold the store and invested in a stock which together would have yielded a return
of 35,000 TL during that year, and gotten a job paying 15,000 TL.
He declined both offers.
a.What is the difference between explicit and implicit costs to a firm? What is the implicit cost of the business
in question?
b.Calculate his economic profits for the year.
c.Was his decision to keep the grocery store economically rational? Explain why or why not. By referring to
the relevant concepts.
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