2. Definition of economic costs

Yakov lives in Chicago and runs a business that sells boats. In an average year, he receives $711,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $411,000; he also pays wages and utility bills totaling $279,000. He owns his showroom; if he chooses to rent it out, he will receive $1,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Yakov does not operate this boat business, he can work as a financial advisor, receive an annual salary of $31,000 with no additional monetary costs, and rent out his showroom at the $1,000 per year rate. No other costs are incurred in running this boat business.

Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats.

	Implicit Cost	Explicit Cost
The salary Yakov could earn if he worked as a financial advisor
The wholesale cost for the boats that Yakov pays the manufacturer
The wages and utility bills that Yakov pays
The rental income Yakov could receive if he chose to rent out his showroom

Complete the following table by determining Yakov's accounting and economic profit of his boat business.

	Profit
(Dollars)
Accounting Profit
Economic Profit