Homework Help is Here – Start Your Trial Now!
Business
Economics
1. Definition of economic costs Bob lives in Miami and runs a business that sells guitars. In an average year, he receives $793,000 from selling guitars. 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 Bob does not operate this guitar 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 guitar business. Identify each of Bob's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The wholesale cost for the guitars that Bob pays the manufacturer The wages and utility bills that Bob pays The salary Bob could earn if he worked as a financial advisor The rental income Bob could receive if he chose to rent out his showroom Complete the following table by determining Bob's accounting and economic profit of his guitar business. Profit (Dollars) Accounting Profit Economic Profit

1. Definition of economic costs Bob lives in Miami and runs a business that sells guitars. In an average year, he receives $793,000 from selling guitars. 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 Bob does not operate this guitar 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 guitar business. Identify each of Bob's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The wholesale cost for the guitars that Bob pays the manufacturer The wages and utility bills that Bob pays The salary Bob could earn if he worked as a financial advisor The rental income Bob could receive if he chose to rent out his showroom Complete the following table by determining Bob's accounting and economic profit of his guitar business. Profit (Dollars) Accounting Profit Economic Profit

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Cost Of Production
Section: Chapter Questions
Problem 5QR
See similar textbooks
icon
Related questions
Question
1. Definition of economic costs Bob lives in Miami and runs a business that sells guitars. In an average year, he receives $793,000 from selling guitars. 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 Bob does not operate this guitar 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 guitar business. Identify each of Bob's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The wholesale cost for the guitars that Bob pays the manufacturer The wages and utility bills that Bob pays The salary Bob could earn if he worked as a financial advisor The rental income Bob could receive if he chose to rent out his showroom Complete the following table by determining Bob's accounting and economic profit of his guitar business. Profit (Dollars) Accounting Profit Economic Profit
Transcribed Image Text:1. Definition of economic costs Bob lives in Miami and runs a business that sells guitars. In an average year, he receives $793,000 from selling guitars. 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 Bob does not operate this guitar 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 guitar business. Identify each of Bob's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The wholesale cost for the guitars that Bob pays the manufacturer The wages and utility bills that Bob pays The salary Bob could earn if he worked as a financial advisor The rental income Bob could receive if he chose to rent out his showroom Complete the following table by determining Bob's accounting and economic profit of his guitar business. Profit (Dollars) Accounting Profit Economic Profit
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
SEE MORE TEXTBOOKS