Ben is a musician who has just finished his degree in music technology. He is cu

Question

Ben is a musician who has just finished his degree in music technology. He is currently deciding whether or not to accept a job in Brisbane as a music teacher at a local school or focus on being a touring musician. He will earn a wage of $35,000/year as a teacher in Brisbane, and $25,000/year as a touring musician based in Melbourne. Rent is $10,000/year in Brisbane, but only $5,000/year in Melbourne. Assume touring accommodation costs are $0 as the tour provides free accommodation for musicians. However, if Ben decides to stay in Brisbane, he will spend $2,000/year on travelling to visit his friend in Melbourne.

Select the item from the list provided to make the following statements true:

By taking the teacher job in Brisbane, Ben will earn an _______ of $3000 compared to touring.

Ben’s explicit costs for choosing to take the teaching job in Brisbane are_______.

For Ben to be indifferent, from an economist’s point of view between teaching and touring, he would need to make _______ when choosing either option.

By taking the teacher job in Brisbane, Ben will earn an _______ of $3000 compared to touring.

Ben’s explicit costs for choosing to take the teaching job in Brisbane are_______.

For Ben to be indifferent, from an economist’s point of view between teaching and touring, he would need to make _______ when choosing either option.

1.

  Accounting profit

2.

  -$2000/year

3.

  Total cost

4.

  Economic profit

5.

  Economic loss

6.

  A normal profit

7.

  $12000/year

8.

  $33000/year

9.

  Explicit cost

10.

  $45000/year

11.

  $1900

12.

  Implicit cost

Explanation / Answer

The net earnings are as given above, that is wages - the rent - visit to a friend charges.

The economic profit thus comes to $3000.

Explicit costs are paid out costs which are = 10000(rent) + 2000(travel charges) = $12000

For Ben to be indifferent, from an economist’s point of view between teaching and touring, he would need to make a normal profit when choosing either option.

Brisbane Melbourne Wages 35000 25000 Rent 10000 5000 Travel 2000 0 23000 20000

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