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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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 piano business.
Identify each of Jacques's costs in the following table as either an implicit cost or an explicit cost of selling planos.
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
Complete the following table by determining Jacques's accounting and economic profit of his piano business.
Accounting Profit
Economic Profit
Alternatively, the economic profit he would earn as a financial advisor would be
Profit
(Dollars)
If Jacques's goal is to maximize his economic profit, he
True or false: Jacques is earning a normal profit.
False
True
stay in the piano business.
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