1. Definition of economic costs Eric lives in San Francisco and runs a business that sells pianos. In an average year, he receives $725,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $425,000; he also pays wages and utility bills totaling $265,000. 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 Eric does not operate this piano business, he can work as a financial advisor, receive an annual salary of $45,000 with no additional monetary costs, and rent out his showroom at the $1,000 per year rate. No other costs are incurred in running this piano business.

1. Definition of economic costs Eric lives in San Francisco and runs a business that sells pianos. In an average year, he receives $725,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $425,000; he also pays wages and utility bills totaling $265,000. 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 Eric does not operate this piano business, he can work as a financial advisor, receive an annual salary of $45,000 with no additional monetary costs, and rent out his showroom at the $1,000 per year rate. No other costs are incurred in running this piano business.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 4SCQ: Edna is living in a retirement home where home where most of her needs are taken care of, but she...

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