2. Definition of economic costs Van lives in Philadelphia and operates a small company selling scooters. On average, he receives $849,000 per year from selling scooters. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $390,000. He also pays several utility companies, as well as his employees wages totaling $359,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $72,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Van does not operate the scooter business, he can work as a programmer and earn a yearly salary of $25,000 with no additional monetary costs, and rent out his storefront at the $72,000 per year rate. There are no other costs faced by Van in running this scooter company. Identify each of Van's costs in the following table as either an implicit cost or an explicit cost of selling scooters. The wages that Van pays The salary Van could earn if he worked as a programmer The wholesale cost for the scooters that van pays the manufacturer The rental income Van could receive if he chose to rent out his showroom Implicit Cost Explicit Cost Complete the following table by determining Van's accounting and economic profit of his scooter business. Profit Accounting Profit Economic Profit (Dollars)
2. Definition of economic costs Van lives in Philadelphia and operates a small company selling scooters. On average, he receives $849,000 per year from selling scooters. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $390,000. He also pays several utility companies, as well as his employees wages totaling $359,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $72,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Van does not operate the scooter business, he can work as a programmer and earn a yearly salary of $25,000 with no additional monetary costs, and rent out his storefront at the $72,000 per year rate. There are no other costs faced by Van in running this scooter company. Identify each of Van's costs in the following table as either an implicit cost or an explicit cost of selling scooters. The wages that Van pays The salary Van could earn if he worked as a programmer The wholesale cost for the scooters that van pays the manufacturer The rental income Van could receive if he chose to rent out his showroom Implicit Cost Explicit Cost Complete the following table by determining Van's accounting and economic profit of his scooter business. Profit Accounting Profit Economic Profit (Dollars)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Definition of economic costs
Van lives in Philadelphia and operates a small company selling scooters. On average, he receives $849,000 per year from selling scooters. Out of this
revenue from sales, he must pay the manufacturer a wholesale cost of $390,000. He also pays several utility companies, as well as his employees
wages totaling $359,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $72,000 in
rent. Assume there is no depreciation in the value of his property over the year. Further, if Van does not operate the scooter business, he can work as
a programmer and earn a yearly salary of $25,000 with no additional monetary costs, and rent out his storefront at the $72,000 per year rate. There
are no other costs faced by Van in running this scooter company.
Identify each of Van's costs in the following table as either an implicit cost or an explicit cost of selling scooters.
The wages that Van pays
The salary Van could earn if he worked as a programmer
The wholesale cost for the scooters that van pays the manufacturer
The rental income Van could receive if he chose to rent out his showroom
Implicit Cost
Explicit Cost
Complete the following table by determining Van's accounting and economic profit of his scooter business.
Profit
Accounting Profit
Economic Profit
(Dollars)
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