Chapter 52, Problem 1CYU

a)

To determine

Whether supplies such as paint stripper, varnish, polish, and sandpaper an explicit cost or implicit cost

Explanation of Solution

As supplies need an outlay of money, therefore, it is included in an explicit cost. These supplies include expenses or costs that incurred directly by a company just like payments for goods, rent, or labor and salaries. Moreover, these all supplies considered tangible expenses because a particular amount of money needs to spend on them. Therefore, these supplies are the explicit costs but not implicit costs.

Economics Concept Introduction

Introduction: The costs which are already occurred but are not shown or visible as a cost or expense are implicit costs.

The costs which are used to determine the profitability of the company and consider as tangible expenses are explicit costs.

b)

To determine

Whether basement space, which could otherwise rented out as an apartment instead of being workroom is an explicit cost or implicit cost.

Explanation of Solution

When the basement is used in a way that generates money, such as renting it, then the forgone money is the implicit cost which is incurred and otherwise, the implicit cost would be zero. Utilizing an asset entails an implicit cost as opposed to renting or purchasing it and when a basement is given for renting services then it is used by someone and forgone money or intangible costs are the implicit costs for owner who actually buys or possess this asset but not using it.

Economics Concept Introduction

Introduction: The costs which are already occurred but are not shown or visible as a cost or expense are implicit costs.

The costs which are used to determine the profitability of the company and consider as tangible expenses are explicit costs.

c)

To determine

Whether wages paid to a part-time Helper is an explicit cost or implicit cost

Explanation of Solution

Economics Concept Introduction

Introduction: The costs which are already occurred but are not shown or visible as a cost or expense are implicit costs.

The costs which are used to determine the profitability of the company and consider as tangible expenses are explicit costs.

d)

To determine

Whether a van that they inherited and use only for transporting furniture is an explicit cost or implicit cost

Explanation of Solution

Economics Concept Introduction

Introduction: The costs which are already occurred but are not shown or visible as a cost or expense are implicit costs.

The costs which are used to determine the profitability of the company and consider as tangible expenses are explicit costs.

e)

To determine

Whether job at a larger furniture restorer that K` gave up in order to run the business is an explicit cost or implicit cost

Explanation of Solution

Economics Concept Introduction

Introduction: The costs which are already occurred but are not shown or visible as a cost or expense are implicit costs.

The costs which are used to determine the profitability of the company and consider as tangible expenses are explicit costs.