2. Definition of economic costsLarry lives in Denver and runs a business that sells guitars. In an average year, he receives $731,000 from selling guitars. Of this sales revenue, hemust pay the manufacturer a wholesale cost of $431,000; he also pays wages and utility bills totaling $259,000. He owns his showroom; if he choosesto rent it out, he will receive $8,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Larry does notoperate this guitar business, he can work as an accountant, receive an annual salary of $30,000 with no additional monetary costs, and rent out hisshowroom at the $8,000 per year rate. No other costs are incurred in running this guitar business.Identify each of Larry's costs in the following table as either an implicit cost or an explicit cost of selling guitars.Implicit CostExplicit CostThe rental income Larry could receive if he chose to rent out his showroomThe salary Larry could earn if he worked as an accountantThe wholesale cost for the guitars that Larry pays the manufacturerThe wages and utility bills that Larry paysComplete the following table by determining Larry's accounting and economic profit of his guitar business.Profit(Dollars)Accounting ProfitEconomic Profit

The actual cost incurred by a firm for the purchasing and hiring of inputs, for the production…

Identify each of Larry's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The rental income Larry could receive if he chose to rent out his showroom The salary Larry could earn if he worked as an accountant The wholesale cost for the guitars that Larry pays the manufacturer The wages and utility bills that Larry pays Complete the following table by determining Larry's accounting and economic profit of his guitar business.

Identify each of Larry's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The rental income Larry could receive if he chose to rent out his showroom The salary Larry could earn if he worked as an accountant The wholesale cost for the guitars that Larry pays the manufacturer The wages and utility bills that Larry pays Complete the following table by determining Larry's accounting and economic profit of his guitar 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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