Answer:
Yakov's explicit costs are the monetary costs that he pays while running his business:
Payment to manufacturer: $404,000
Wages and utility bills: $286,000
Total explicit costs: $690,000
Yakov's implicit costs are his opportunity costs, in other words, the things he gives up in order to run his business:
Rent he would get for his showroom: $3,000
Wage he would get as an accountant: $20,000
Total implicit costs: $23,000
Yakov's accounting profit is equal to revenue minus total explicit costs:
Accounting profit = $704,000 - $690,000
= $14,000
Yakov's economic profit is equal to revenue minus total costs (the sum of implic costs and explicit costs)
Economic profit = $704,000 - $713,000
= ($9,000)
Despite the fact that Yakov is not earning an economic profit selling boats, as an accountant, he would give up on the $704,000 that he is been making from selling boats. For that reason, he should keep the boat selling business.
