Answer:
Explicit costs are actual costs which Yakov must make while implicit costs are opposite of explicit costs, Implicit costs are opportunity costs.
Grouping them, we have the following;
•The wages and utility bills that Yakov pays. => Explicit costs
•The salary Yakov could earn if he worked as a paralegal.=>Implicit Costs
•The wholesale cost for the pianos that Yakov pays the manufacturer. => Explicit costs
•The rental income Yakov could receive if he chose to rent out his showroom =>Implicit Costs
2) Yakov's accounting and economic profit of his piano business.
Profit($)
Acct Profit.......... Economic Profit
$14,000. .............. -$9,000 (loss)
•Yakov's accounting profit will be his revenue - explicit costs.
Therefore accounting profit=
$704,000 - ($404,000 - $286,000) = $14,000
• Yakov's economic profit will be (accounting profit - (rent + forgone salary)
Therefore, accounting profit =
$14,000 - ($3,000+$20,000) = -$9,000
