Ben Cartwright runs the wild west wax museum in Carson City, Nevada. the museum has been in business for 40 years and is a major tourist attraction. the total value of the museum's capital stock is $3.5 million, which ben owns outright. this year, the museum earned a total of $1.4 million after out-of-pocket expenses. without taking the opportunity cost of capital into account, this means that ben is earning a 40 percent return on his capital. suppose that risk-free bonds are currently paying a rate of 7 percent to those who buy them.

1) What is meant by the "opportunity cost of capital?

A. The value of capital
B. The implicit cost of capital
C. The present discounted value of capital
D. The explicit cost of capital
E. The accounting cost of capital

2) Explain why opportunity costs are real" costs even though they do not necessarily involve out-of-pocket expenses.

A. The capital represents an out-of-pocket expense for capital owners and investors.
B. The capital could have instead earned a normal rate of return invested in risk-free government bonds.
C. Those who borrow capital must pay capital owners or investors a normal rate of return.
D. The capital could have earned more than the capital's out-of-pocket expenses invested in bank certificates of deposit.
E. Those who own capital must pay taxes equal to the normal rate of return from bank certificates of deposit.

3) The opportunity cost of Ben's capital is $(Enter your response as a whole number).
4) Ben is earning an excess profit of $(Enter your response as a whole number).