Kenji lives in Mississauga and runs a business that sells pianos. In an average year, he receives $723,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $423,000; he also pays wages and utility bills totalling $267,000. He owns his show room; if he chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Ke does not operate this piano business, he can work as a financial advisor, receive an annual salary of $20,000 with no additional monetary costs, and rent out his show room at the $2,000 per year rate. No other costs are incurred in running this piano business. Identify each of Kenji's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost The wages and utility bills that Kenji pays The salary Kenji could earn if he worked as a financial advisor The rental income Kenji could receive if he chose to rent out his show room The wholesale cost for the pianos that Kenji pays the manufacturer Complete the following table by determining Kenji's accounting and economic profit of his piano business. Accounting Profit Economic Profit ο|ο|ο|ο Profit (Dollars)
Kenji lives in Mississauga and runs a business that sells pianos. In an average year, he receives $723,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $423,000; he also pays wages and utility bills totalling $267,000. He owns his show room; if he chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Ke does not operate this piano business, he can work as a financial advisor, receive an annual salary of $20,000 with no additional monetary costs, and rent out his show room at the $2,000 per year rate. No other costs are incurred in running this piano business. Identify each of Kenji's costs in the following table as either an implicit cost or an explicit cost of selling pianos. Implicit Cost Explicit Cost The wages and utility bills that Kenji pays The salary Kenji could earn if he worked as a financial advisor The rental income Kenji could receive if he chose to rent out his show room The wholesale cost for the pianos that Kenji pays the manufacturer Complete the following table by determining Kenji's accounting and economic profit of his piano business. Accounting Profit Economic Profit ο|ο|ο|ο Profit (Dollars)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Kenji lives in Mississauga and runs a business that sells pianos. In an average year, he receives $723,000 from selling pianos. Of this sales revenue,
he must pay the manufacturer a wholesale cost of $423,000; he also pays wages and utility bills totalling $267,000. He owns his show room; if he
chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Kenji
does not operate this piano business, he can work as a financial advisor, receive an annual salary of $20,000 with no additional monetary costs, and
rent out his show room at the $2,000 per year rate. No other costs are incurred in running this piano business.
Identify each of Kenji's costs in the following table as either an implicit cost or an explicit cost of selling pianos.
Implicit Cost
The wages and utility bills that Kenji pays
The salary Kenji could earn if he worked as a financial advisor
The rental income Kenji could receive if he chose to rent out his show room
The wholesale cost for the pianos that Kenji pays the manufacturer
Complete the following table by determining Kenji's accounting and economic profit of his piano business.
Accounting Profit
Economic Profit
Explicit Cost
Profit
(Dollars)
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