2. Definition of economic costs Musashi lives in Dallas and runs a business that sells boats. In an average year, he rec

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2. Definition of economic costs
Musashi lives in Dallas and runs a business that sells boats. In
an average year, he receives $842,000 from selling boats. Of this
sales revenue, he must pay the manufacturer a wholesale cost of
$452,000; he also pays wages and utility bills totaling $301,000.
He owns his showroom; if he chooses to rent it out, he will receive
$38,000 in rent per year. Assume that the value of this showroom
does not depreciate over the year. Also, if Musashi does not
operate this boat business, he can work as an accountant, receive
an annual salary of $48,000 with no additional monetary costs, and
rent out his showroom at the $38,000 per year rate. No other costs
are incurred in running this boat business.
Identify each of Musashi’s costs in the following table as
either an implicit cost or an explicit cost of selling boats.
Implicit Cost
Explicit Cost
The salary Musashi could earn if he worked as an accountant
The wholesale cost for the boats that Musashi pays the
manufacturer
The wages and utility bills that Musashi pays
The rental income Musashi could receive if he chose to rent out
his showroom
Complete the following table by determining Musashi’s accounting
and economic profit of his boat business.
Profit
(Dollars)
Accounting Profit ?
Economic Profit ?