14. Lorenzo lives in New York City and runs a business that sells guitars. In an average year, he receives $851,000from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $476,000; he alsopays wages and utility bills totaling $281,000. He owns his showroom; if he chooses to rent it out, he will receive$71,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, ifLorenzo does not operate this guitar business, he can work as an accountant and receive an annual salary of$34,000 with no additional monetary costs. No other costs are incurred in running this guitar business.a. Which costs are considered explicit? Which costs are considered implicit?b. What is Lorenzo's total cost?C.What is Lorenzo's total revenue?d. What is Lorenzo's accounting profit?e. What is Lorenzo's economic profit?f. Is Lorenzo earning a normal profit? If his goal is to maximize economic profit, should Lorenzo quit theguitar business and work as an accountant, or should he continue his guitar business.

Q 14.Individual L sells guitars (G).Sale revenue in a year = $851000Wholesale cost = $476000Wages…

c. What is Lorenzo's total revenue? d. What is Lorenzo's accounting profit? e. What is Lorenzo's economic profit? f. Is Lorenzo earning a normal profit? If his goal is to maximize economic profit, should Lorenzo quit t

c. What is Lorenzo's total revenue? d. What is Lorenzo's accounting profit? e. What is Lorenzo's economic profit? f. Is Lorenzo earning a normal profit? If his goal is to maximize economic profit, should Lorenzo quit t

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 14E

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