2. Definition of economic costs Jake lives in Detroit and runs a business that sells pianos. In an average year, he receives $726,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $426,000; he also pays wages and utility bills totaling $264,000. He owns his showroom; if he chooses to rent it out, he will receive $13,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Jake does not operate this piano business, he can work as a paralegal and receive an annual salary of $22,000 with no additional monetary costs. No other costs are incurred in running this piano business. Implicit Cost Explicit Cost Identify each of Jake's costs in the following table as either an implicit cost or an explicit cost of selling pianos. The wholesale cost for the pianos that Jake pays the manufacturer The wages and utility bills that Jake pays The rental income Jake could receive if he chose to rent out his showroom The salary Jake could earn if he worked as a paralegal O O Complete the following table by determining Jake's accounting and economic profit of his piano business.

2. Definition of economic costs Jake lives in Detroit and runs a business that sells pianos. In an average year, he receives $726,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $426,000; he also pays wages and utility bills totaling $264,000. He owns his showroom; if he chooses to rent it out, he will receive $13,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Jake does not operate this piano business, he can work as a paralegal and receive an annual salary of $22,000 with no additional monetary costs. No other costs are incurred in running this piano business. Implicit Cost Explicit Cost Identify each of Jake's costs in the following table as either an implicit cost or an explicit cost of selling pianos. The wholesale cost for the pianos that Jake pays the manufacturer The wages and utility bills that Jake pays The rental income Jake could receive if he chose to rent out his showroom The salary Jake could earn if he worked as a paralegal O O Complete the following table by determining Jake's accounting and economic profit of his piano business.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 5QR

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