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16 January, 09:04

Jacques lives in Miami 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 totaling $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 Jacques 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 Charles's costs in the following table as either an implicit cost or an explicit cost of selling boats.

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  1. 16 January, 12:26
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    Remember, Implicit cost refers to cost that do not involve monetary transactions by Jacques, while his Explicit cost includes all forms of direct payments made by Jacques to others while selling his boat.

    Therefore, the cost are assigned below:

    The $50,000 salary Jacques could earn if he worked as a financial advisor = Implicit Cost The $15,000 rental income per year Jacques would receive if he chose to rent out his showroom = Implicit The wholesale cost of $430,000 and utility bills totaling $301,000 cost for the boats that Jacques pays the manufacturer = Explicit Cost
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