1. Definition of economic costs Manuel lives in San Diego and operates a small company selling electronic cigarettes. On average, he receives $1,036,000 per year from selling electronic cigarettes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $644,000. He also pays several utility companies, as well as his employees wages totaling $306,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $13,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Manuel does not operate the electronic cigarette business, he can work as a programmer and earn a yearly salary of $70,000 with no additional monetary costs, and rent out his storefront at the $13,000 per year rate. There are no other costs faced by Manuel in running this electronic cigarette company. Identify each of Manuel's costs in the following table as either an implicit cost or an explicit cost of selling electronic cigarettes. The wholesale cost for the electronic cigarettes that Manuel pays the manufacturer The salary Manuel could earn if he worked as a programmer Implicit Cost Explicit Cost The wages that Manuel pays О The rental income Manuel could receive if he chose to rent out his showroom О О Complete the following table by determining Manuel's accounting and economic profit of his electronic cigarette business. Accounting Profit Economic Profit Profit (Dollars)
1. Definition of economic costs Manuel lives in San Diego and operates a small company selling electronic cigarettes. On average, he receives $1,036,000 per year from selling electronic cigarettes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $644,000. He also pays several utility companies, as well as his employees wages totaling $306,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $13,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Manuel does not operate the electronic cigarette business, he can work as a programmer and earn a yearly salary of $70,000 with no additional monetary costs, and rent out his storefront at the $13,000 per year rate. There are no other costs faced by Manuel in running this electronic cigarette company. Identify each of Manuel's costs in the following table as either an implicit cost or an explicit cost of selling electronic cigarettes. The wholesale cost for the electronic cigarettes that Manuel pays the manufacturer The salary Manuel could earn if he worked as a programmer Implicit Cost Explicit Cost The wages that Manuel pays О The rental income Manuel could receive if he chose to rent out his showroom О О Complete the following table by determining Manuel's accounting and economic profit of his electronic cigarette business. Accounting Profit Economic Profit Profit (Dollars)
Chapter1: The Art And Science Of Economic Analysis
Section: Chapter Questions
Problem 2.4P
Related questions
Question
Transcribed Image Text:1. Definition of economic costs
Manuel lives in San Diego and operates a small company selling electronic cigarettes. On average, he receives $1,036,000 per year from selling
electronic cigarettes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $644,000. He also pays several utility
companies, as well as his employees wages totaling $306,000. He owns the building that houses his storefront; if he choose to rent it out, he would
receive a yearly amount of $13,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Manuel does not
operate the electronic cigarette business, he can work as a programmer and earn a yearly salary of $70,000 with no additional monetary costs, and
rent out his storefront at the $13,000 per year rate. There are no other costs faced by Manuel in running this electronic cigarette company.
Identify each of Manuel's costs in the following table as either an implicit cost or an explicit cost of selling electronic cigarettes.
The wholesale cost for the electronic cigarettes that Manuel pays the manufacturer
The salary Manuel could earn if he worked as a programmer
Implicit Cost Explicit Cost
The wages that Manuel pays
О
The rental income Manuel could receive if he chose to rent out his showroom
О
О
Complete the following table by determining Manuel's accounting and economic profit of his electronic cigarette business.
Accounting Profit
Economic Profit
Profit
(Dollars)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning