Kenji lives in Dallas and runs a business that sells guitars. In an average year, he receives $724,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $424,000; he also pays wages and utility bills totaling $266,000. He owns his showroom; if he chooses to rent it out, he will receive $4,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kenji does not operate this guitar business, he can work as a paralegal, receive an annual salary of $21,000 with no additional monetary costs, and rent out his showroom at the $4,000 per year rate. No other costs are incurred in running this guitar business. Identify each of Kenji's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost O The rental income Kenji could receive if he chose to rent out his showroom The wholesale cost for the guitars that Kenji pays the manufacturer The wages and utility bills that Kenji pays The salary Kenji could earn if he worked as a paralegal Accounting Profit O Profit (Dollars) O O O O O Complete the following table by determining Kenji's accounting and economic profit of his guitar business. O
Kenji lives in Dallas and runs a business that sells guitars. In an average year, he receives $724,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $424,000; he also pays wages and utility bills totaling $266,000. He owns his showroom; if he chooses to rent it out, he will receive $4,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Kenji does not operate this guitar business, he can work as a paralegal, receive an annual salary of $21,000 with no additional monetary costs, and rent out his showroom at the $4,000 per year rate. No other costs are incurred in running this guitar business. Identify each of Kenji's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost O The rental income Kenji could receive if he chose to rent out his showroom The wholesale cost for the guitars that Kenji pays the manufacturer The wages and utility bills that Kenji pays The salary Kenji could earn if he worked as a paralegal Accounting Profit O Profit (Dollars) O O O O O Complete the following table by determining Kenji's accounting and economic profit of his guitar business. O
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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