Yakov lives in Montreal and runs a business that sells boats. In an average year, he receives $793,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totalling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Yakov does not operate this boat business, he can work as a financial advisor and receive an annual salary of $50,000 with no additional monetary costs. No other costs are incurred in running this boat business. Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The rental income Yakov could receive if he chose to rent out his showroom The wholesale cost for the boats that Yakov pays the manufacturer The salary Yakov could earn if he worked as a financial advisor The wages and utility bills that Yakov pays Complete the following table by determining Yakov's accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit True or False: Yakov is earning a normal profit. True False
Yakov lives in Montreal and runs a business that sells boats. In an average year, he receives $793,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totalling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Yakov does not operate this boat business, he can work as a financial advisor and receive an annual salary of $50,000 with no additional monetary costs. No other costs are incurred in running this boat business. Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The rental income Yakov could receive if he chose to rent out his showroom The wholesale cost for the boats that Yakov pays the manufacturer The salary Yakov could earn if he worked as a financial advisor The wages and utility bills that Yakov pays Complete the following table by determining Yakov's accounting and economic profit of his boat business. Profit (Dollars) Accounting Profit Economic Profit True or False: Yakov is earning a normal profit. True False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Yakov lives in Montreal and runs a business that sells boats. In an average year, he receives $793,000 from selling boats. Of this sales revenue, he
must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totalling $301,000. He owns his showroom; if he
chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if
Yakov does not operate this boat business, he can work as a financial advisor and receive an annual salary of $50,000 with no additional monetary
costs. No other costs are incurred in running this boat business.
Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats.
Implicit Cost Explicit Cost
The rental income Yakov could receive if he chose to rent out his showroom
The wholesale cost for the boats that Yakov pays the manufacturer
The salary Yakov could earn if he worked as a financial advisor
The wages and utility bills that Yakov pays
Complete the following table by determining Yakov's accounting and economic profit of his boat business.
Profit
(Dollars)
Accounting Profit
Economic Profit
True or False: Yakov is earning a normal profit.
True
False
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