Identify each of Vans costs in the following table as either an implicit cost or an explicit cost of selling guitars. 1)

Van lives in San Diego and runs a business that sells guitars. In an average year he receives $851 Show more Van lives in San Diego and runs a business that sells guitars. In an average year he receives $851000 from selling guitars. Of this sales revenue he must pay the manufacturer a wholesale cost of $476000; he also pays wages and utility bills totaling $281000. He owns his showroom; if he chooses to rent it out he will receive $71000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also if Van does not operate this guitar business he can work as an accountant and receive an annual salary of $34000 with no additional monetary costs. No other costs are incurred in running this guitar business. Identify each of Vans costs in the following table as either an implicit cost or an explicit cost of selling guitars. 1) The wages and utility bills that Van pays a) implicit cost or b) explicit cost 2) The wholesale cost for the guitars that Van pays the manufacturer a) implicit cost or b) explict cost 3)The rental income Van could receive if he chose to rent out his showroom a) implicit cost or b) explicit cost 4) The salary Van could earn if he worked as an accountant a) implicit cost or b) explicit cost Complete the following table by determining Vans accounting and economic profit of his guitar business. Profit (Dollars) Accounting Profit Economic Profit 5) If Vans goal is to maximize his economic profit he (should or should not?) stay in the guitar business because the economic profit he would earn as an accountant would be ($_________). Show less

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