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Sagot :
Answer:
Explicit costs are normal costs of operating a business.
Implicit costs are opportunity costs meaning that they are the benefits foregone by engaging in a certain course of action.
The wholesale cost for the pianos that Hubert pays the manufacturer ⇒ EXPLICIT COST.
The salary Hubert could earn if he worked as an accountant ⇒ IMPLICIT COST.
The wages and utility bills that Hubert pays ⇒ EXPLICIT COST
The rental income Hubert could receive if he chose to rent out his showroom. ⇒ IMPLICIT COSTS
Accounting Profit = Revenue - Explicit costs
= 842,000 - 452,000 - 301,000
= $89,000
Economic Profit = Revenue - Explicit costs - Implicit costs
= 842,000 - 452,000 - 301,000 - 38,000 - 48,000
= $3,000
If Hubert's goal is to maximize his economic profit, he should stay in the piano business because the economic profit he would earn as an accountant would be -$3,000.
Economic profit as accountant = Salary + rental income - accounting profit from piano
= 48,000 + 38,000 - 89,000
= -$3,000
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