Question

Hubert lives in New York City and runs a business that sells boats. In an average year, he receives $723,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $423,000; he also pays wages and utility bills totaling $267,000. He owns his showroom; if he chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Hubert does not operate this boat business, he can work as a financial advisor, receive an annual salary of $20,000 with no additional monetary costs, and rent out his showroom at the $2,000 per year rate. No other costs are incurred in running this boat business.
Identify each of Darnell's costs given below as either an implicit cost or an explicit cost of selling pianos.

a. The rental income Darnell could receive if he chose to rent out his showroom
b. The wages and utility bills that Darnell pays
c. The salary Darnell could earn if he worked as a financial advisor
d. The wholesale cost for the pianos that Darnell pays the manufacturer

Answer 1

Answer:

A. the rental incomw darnell could receive if he choose to rent out his showroom

Answer 2

Correct answer is A.