Gilberto lives in Detroit and runs a business that sells pianos. In an average year, he receives $793,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Gilberto does not operate this piano business, he can work as a financial advisor, receive an annual salary of $50,000 with no additional monetary costs, and rent out his showroom at the $15,000 per year rate. No other costs are incurred in running this piano business. Identify each of Gilberto's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost The wholesale cost for the pianos that Gilberto pays the manufacturer The salary Gilberto could earn if he worked as a financial advisor The rental income Gilberto could receive if he chose to rent out his showroom The wages and utility bills that Gilberto pays Complete the following table by determining Gilberto's accounting and economic profit of his piano business. Profit (Dollars) Accounting Profit Economic Profit O0o O
Gilberto lives in Detroit and runs a business that sells pianos. In an average year, he receives $793,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Gilberto does not operate this piano business, he can work as a financial advisor, receive an annual salary of $50,000 with no additional monetary costs, and rent out his showroom at the $15,000 per year rate. No other costs are incurred in running this piano business. Identify each of Gilberto's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost The wholesale cost for the pianos that Gilberto pays the manufacturer The salary Gilberto could earn if he worked as a financial advisor The rental income Gilberto could receive if he chose to rent out his showroom The wages and utility bills that Gilberto pays Complete the following table by determining Gilberto's accounting and economic profit of his piano business. Profit (Dollars) Accounting Profit Economic Profit O0o O
Chapter1: Making Economics Decisions
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Transcribed Image Text:Gilberto lives in Detroit and runs a business that sells pianos. In an average year, he receives $793,000 from selling pianos. Of this sales revenue, he
must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses
to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Gilberto
does not operate this piano business, he can work as a financial advisor, receive an annual salary of $50,000 with no additional monetary costs, and
rent out his showroom at the $15,000 per year rate. No other costs are incurred in running this piano business.
Identify each of Gilberto's costs in the following table as either an implicit cost or an explicit cost of selling pianos.
Implicit Cost
Explicit Cost
The wholesale cost for the pianos that Gilberto pays the manufacturer
The salary Gilberto could earn if he worked as a financial advisor
The rental income Gilberto could receive if he chose to rent out his showroom
The wages and utility bills that Gilberto pays
Complete the following table by determining Gilberto's accounting and economic profit of his piano business.
Profit
(Dollars)
Accounting Profit
Economic Profit
O0o O
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