Jacques 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 Jacques does not operate this piano business, he can work as a financial advisor and receive an annual salary of $50,000 with no additional monetary costs. No other costs are incurred in running this plano business. Identify each of Jacques'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 Jacques pays the manufacturer The salary Jacques could earn if he worked as a financial advisor The rental income Jacques could receive if he chose to rent out his showroom The wages and utility bills that Jacques pays Accounting Profit Economic Profit Complete the following table by determining Jacques's accounting and economic profit of his plano business. Profit (Dollars) Alternatively, the economic profit he would earn as a financial advisor would be If Jacques's goal is to maximize his economic profit, he True or false: Jacques is earning a normal profit. False O O stay in the piano business.

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Explicit and Implicit Cost Analysis

The entire idea of the cost of production or production cost is applied corresponding or we can say that it is related to money cost. Money cost refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factors of production or factor services.