tri lives in Houston and runs a business that sells pianos. In an average year, he receives $722,000 from selling pianos. Of this sales revenue, he t pay the manufacturer a wholesale cost of $422,000; he also pays wages and utility bills totaling $268,000. He owns his showroom; if he chooses ent 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 Dmitri does operate this piano business, he can work as a paralegal and receive an annual salary of $42,000 with no additional monetary costs. No other costs incurred in running this piano business. tify each of Dmitri's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost e wholesale cost for the pianos that Dmitri pays the manufacturer e rental income Dmitri could receive if he chose to rent out his showroom e wages and utility bills that Dmitri pays e salary Dmitri could earn if he worked as a paralegal counting Profit onomic Profit natively, the economic profit he would earn as a paralegal would be $ plete the following table by determining Dmitri's accounting and economic profit of his piano business. Profit (Dollars) mitri's goal is to maximize his economic profit, he or false: Dmitri is earning a normal profit. True O stay in the piano business. O O
tri lives in Houston and runs a business that sells pianos. In an average year, he receives $722,000 from selling pianos. Of this sales revenue, he t pay the manufacturer a wholesale cost of $422,000; he also pays wages and utility bills totaling $268,000. He owns his showroom; if he chooses ent 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 Dmitri does operate this piano business, he can work as a paralegal and receive an annual salary of $42,000 with no additional monetary costs. No other costs incurred in running this piano business. tify each of Dmitri's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost e wholesale cost for the pianos that Dmitri pays the manufacturer e rental income Dmitri could receive if he chose to rent out his showroom e wages and utility bills that Dmitri pays e salary Dmitri could earn if he worked as a paralegal counting Profit onomic Profit natively, the economic profit he would earn as a paralegal would be $ plete the following table by determining Dmitri's accounting and economic profit of his piano business. Profit (Dollars) mitri's goal is to maximize his economic profit, he or false: Dmitri is earning a normal profit. True O stay in the piano business. O O
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Dmitri lives in Houston and runs a business that sells pianos. In an average year, he receives $722,000 from selling pianos. Of this sales revenue, he
must pay the manufacturer a wholesale cost of $422,000; he also pays wages and utility bills totaling $268,000. 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 Dmitri does
not operate this piano business, he can work as a paralegal and receive an annual salary of $42,000 with no additional monetary costs. No other costs
are incurred in running this piano business.
Identify each of Dmitri'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 Dmitri pays the manufacturer
The rental income Dmitri could receive if he chose to rent out his showroom
The wages and utility bills that Dmitri pays
The salary Dmitri could earn if he worked as a paralegal
Complete the following table by determining Dmitri's accounting and economic profit of his piano business.
Accounting Profit
Economic Profit
Alternatively, the economic profit he would earn as a paralegal would be $
Profit
(Dollars)
If Dmitri's goal is to maximize his economic profit, he
True or false: Dmitri is earning a normal profit.
True
False
stay in the piano business.
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