Edison lives in San Francisco and runs a business that sells boats. In an averag

Question

Edison lives in San Francisco and runs a business that sells boats. In an average year, he receives $722,000 from selling boats. Of this sales revenue, $422,000 chooses to rent it out, he w receive %2,000 an rent per year Assume that the value of this showroom does not deprecate over the year. Also, Edison does not operate this boat business, he can work as a paralegal, receive an annual salary of $21,000 with no additional monetary costs, and rent out his showroom at the $2,000 per year ate. No other costs are incurred in running this boat business Ideneiry each of Edison's costs in the following table as either an implicit cost or an explicit cost of selling boats. Profit (Dollars) tconomic Profnit 0-0-00

Explanation / Answer

1) Implicit cost. -- because implicit cost is the opportunity cost that a firm must give up. here Edison courl recieve the rental income if he choose to rent out his showroom. so the opportunity cost is rent that Edison give up .

2) Implicit cost - because Edison could earn salary if he work so it is opportunity cost of not doing a work as a paralega therefore it is a implicit cost.

3) Explicit cost - becasue explicit cost is the direct payment made to others. and Edison pay the bills .etc

4) Explicit cost -- becasue Edison buys the boats and pays the manufacturer directly.

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