Felix lives in San Francisco and runs a business that sells pianos. In an average year, he receives $711,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $411,000; he also pays wages and utility bills totaling $279,000. He owns his showroom; if he chooses to rent it out, he will receive $1,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Felix does not operate this piano business, he can work as a financial advisor and receive an annual salary of $31,000 with no additional monetary costs. No other costs are incurred in running this piano business. Identify each of Felix's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost The salary Felix could earn if he worked as a financial advisor The wages and utility bills that Felix pays The rental income Felix could receive if he chose to rent out his showroom The wholesale cost for the pianos that Felix pays the manufacturer OO

ENGR.ECONOMIC ANALYSIS
14th Edition
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Chapter1: Making Economics Decisions
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Complete the following table by determining Felix's accounting and economic profit of his piano business.
Profit
(Dollars)
Accounting Profit
Economic Profit
Alternatively, the economic profit he would earn as a financial advisor would be $
If Felix's goal is to maximize his economic profit, he
True or false: Felix is earning a normal profit.
False
True
stay in the piano business.
Transcribed Image Text:Complete the following table by determining Felix's accounting and economic profit of his piano business. Profit (Dollars) Accounting Profit Economic Profit Alternatively, the economic profit he would earn as a financial advisor would be $ If Felix's goal is to maximize his economic profit, he True or false: Felix is earning a normal profit. False True stay in the piano business.
Felix lives in San Francisco and runs a business that sells pianos. In an average year, he receives $711,000 from selling pianos. Of this sales revenue,
he must pay the manufacturer a wholesale cost of $411,000; he also pays wages and utility bills totaling $279,000. He owns his showroom; if he
chooses to rent it out, he will receive $1,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Felix
does not operate this piano business, he can work as a financial advisor and receive an annual salary of $31,000 with no additional monetary costs.
No other costs are incurred in running this piano business.
Identify each of Felix's costs in the following table as either an implicit cost or an explicit cost of selling pianos.
Implicit Cost
Explicit Cost
The salary Felix could earn if he worked as a financial advisor
The wages and utility bills that Felix pays
The rental income Felix could receive if he chose to rent out his showroom
The wholesale cost for the pianos that Felix pays the manufacturer
O O
Transcribed Image Text:Felix lives in San Francisco and runs a business that sells pianos. In an average year, he receives $711,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $411,000; he also pays wages and utility bills totaling $279,000. He owns his showroom; if he chooses to rent it out, he will receive $1,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Felix does not operate this piano business, he can work as a financial advisor and receive an annual salary of $31,000 with no additional monetary costs. No other costs are incurred in running this piano business. Identify each of Felix's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost The salary Felix could earn if he worked as a financial advisor The wages and utility bills that Felix pays The rental income Felix could receive if he chose to rent out his showroom The wholesale cost for the pianos that Felix pays the manufacturer O O
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