Question

1. Definition of economic costs Felix lives in Houston and operates a small company selling bikes. On average, he receives $694,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $392,000. He also pays several utility companies, as well as his employees wages totaling $289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $2,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Felix does not operate the bike business, he can work as a programmer and earn a yearly salary of $20,000 with no additional monetary costs, and rent out his storefront at the $2,000 per year rate. There are no other costs faced by Felix in running this bike company. Identify each of Felix's costs in the following table as either an implicit cost or an explicit cost of selling bikes. The salary Felix could earn if he worked as a programmer Implicit Cost Explicit Cost The wholesale cost for the bikes that Felix pays the manufacturer ? The rental income Felix could receive if he chose to rent out his showroom ? The wages that Felix pays Complete the following table by determining Felix's accounting and economic profit of his bike business. Profit (Dollars) Accounting Profit Economic Profit

          1. Definition of economic costs
Felix lives in Houston and operates a small company selling bikes. On average, he receives $694,000 per year from selling bikes. Out of this revenue
from sales, he must pay the manufacturer a wholesale cost of $392,000. He also pays several utility companies, as well as his employees wages
totaling $289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $2,000 in rent.
Assume there is no depreciation in the value of his property over the year. Further, if Felix does not operate the bike business, he can work as a
programmer and earn a yearly salary of $20,000 with no additional monetary costs, and rent out his storefront at the $2,000 per year rate. There are
no other costs faced by Felix in running this bike company.
Identify each of Felix's costs in the following table as either an implicit cost or an explicit cost of selling bikes.
The salary Felix could earn if he worked as a programmer
Implicit Cost Explicit Cost
The wholesale cost for the bikes that Felix pays the manufacturer
?
The rental income Felix could receive if he chose to rent out his showroom
?
The wages that Felix pays
Complete the following table by determining Felix's accounting and economic profit of his bike business.
Profit
(Dollars)
Accounting Profit
Economic Profit

1. Definition of economic costs
Felix lives in Houston and operates a small company selling bikes. On average, he receives 694,000 per year from selling bikes. Out of this revenue
from sales, he must pay the manufacturer a wholesale cost of392,000. He also pays several utility companies, as well as his employees wages
totaling 289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of2,000 in rent.
Assume there is no depreciation in the value of his property over the year. Further, if Felix does not operate the bike business, he can work as a
programmer and earn a yearly salary of 20,000 with no additional monetary costs, and rent out his storefront at the2,000 per year rate. There are
no other costs faced by Felix in running this bike company.
Identify each of Felix's costs in the following table as either an implicit cost or an explicit cost of selling bikes.
The salary Felix could earn if he worked as a programmer
Implicit Cost Explicit Cost
The wholesale cost for the bikes that Felix pays the manufacturer
?
The rental income Felix could receive if he chose to rent out his showroom
?
The wages that Felix pays
Complete the following table by determining Felix's accounting and economic profit of his bike business.
Profit
(Dollars)
Accounting Profit
Economic Profit

Added by Karen V.

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