1. Definition of economic costs Antonio lives in Edmonton and runs a business that sells pianos. In an average year, he receives $851,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $476,000; he also pays wages and utility bills totalling $281,000. He owns his show room; if he chooses to rent it out, he will receive $71,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Antonio does not operate this piano business, he can work as an accountant, receive an annual salary of $34,000 with no additional monetary costs, and rent out his show room at the $71,000 per year rate. No other costs are incurred in running this piano business. Identify each of Antonio's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost о The wholesale cost for the pianos that Antonio pays the manufacturer The wages and utility bills that Antonio pays The rental income Antonio could receive if he chose to rent out his show room The salary Antonio could earn if he worked as an accountant 00 Complete the following table by determining Antonio's accounting and economic profit of his piano business. Accounting Profit Economic Profit Profit (Dollars)
1. Definition of economic costs Antonio lives in Edmonton and runs a business that sells pianos. In an average year, he receives $851,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $476,000; he also pays wages and utility bills totalling $281,000. He owns his show room; if he chooses to rent it out, he will receive $71,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Antonio does not operate this piano business, he can work as an accountant, receive an annual salary of $34,000 with no additional monetary costs, and rent out his show room at the $71,000 per year rate. No other costs are incurred in running this piano business. Identify each of Antonio's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost о The wholesale cost for the pianos that Antonio pays the manufacturer The wages and utility bills that Antonio pays The rental income Antonio could receive if he chose to rent out his show room The salary Antonio could earn if he worked as an accountant 00 Complete the following table by determining Antonio's accounting and economic profit of his piano business. Accounting Profit Economic Profit Profit (Dollars)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. Definition of economic costs
Antonio lives in Edmonton and runs a business that sells pianos. In an average year, he receives $851,000 from selling pianos. Of this sales revenue,
he must pay the manufacturer a wholesale cost of $476,000; he also pays wages and utility bills totalling $281,000. He owns his show room; if he
chooses to rent it out, he will receive $71,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if
Antonio does not operate this piano business, he can work as an accountant, receive an annual salary of $34,000 with no additional monetary costs,
and rent out his show room at the $71,000 per year rate. No other costs are incurred in running this piano business.
Identify each of Antonio's costs in the following table as either an implicit cost or an explicit cost of selling pianos.
Implicit Cost Explicit Cost
O
The wholesale cost for the pianos that Antonio pays the manufacturer
The wages and utility bills that Antonio pays
The rental income Antonio could receive if he chose to rent out his show room
The salary Antonio could earn if he worked as an accountant
00
Complete the following table by determining Antonio's accounting and economic profit of his piano business.
Accounting Profit
Economic Profit
Profit
(Dollars)
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