Question

Charles lives in Houston and runs a business that sells guitars. In an average year, he receives $731,000 from selling guitars. Of this sales revenue, he must 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 chooses to 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 Charles does not operate this guitar business, he can work as an accountant, receive an annual salary of $30,000 with no additional monetary costs, and rent out his showroom at the $8,000 per year rate. No other costs are incurred in running this guitar business. Identify each of Charles's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The salary Charles could earn if he worked as an accountant The wages and utility bills that Charles pays The rental income Charles could receive if he chose to rent out his showroom. The wholesale cost for the guitars that Charles pays the manufacturer Complete the following table by determining Charles's accounting and economic profit of his guitar business. Profit (Dollars) Accounting Profit Economic Profit

          Charles lives in Houston and runs a business that sells guitars. In an average year, he receives $731,000 from selling guitars. Of this sales revenue, he
must 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 chooses
to 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 Charles does
not operate this guitar business, he can work as an accountant, receive an annual salary of $30,000 with no additional monetary costs, and rent out
his showroom at the $8,000 per year rate. No other costs are incurred in running this guitar business.
Identify each of Charles's costs in the following table as either an implicit cost or an explicit cost of selling guitars.
Implicit Cost Explicit Cost
The salary Charles could earn if he worked as an accountant
The wages and utility bills that Charles pays
The rental income Charles could receive if he chose to rent out his showroom.
The wholesale cost for the guitars that Charles pays the manufacturer
Complete the following table by determining Charles's accounting and economic profit of his guitar business.
Profit
(Dollars)
Accounting Profit
Economic Profit

Charles lives in Houston and runs a business that sells guitars. In an average year, he receives 731,000 from selling guitars. Of this sales revenue, he
must pay the manufacturer a wholesale cost of431,000; he also pays wages and utility bills totaling 259,000. He owns his showroom; if he chooses
to rent it out, he will receive8,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Charles does
not operate this guitar business, he can work as an accountant, receive an annual salary of 30,000 with no additional monetary costs, and rent out
his showroom at the8,000 per year rate. No other costs are incurred in running this guitar business.
Identify each of Charles's costs in the following table as either an implicit cost or an explicit cost of selling guitars.
Implicit Cost Explicit Cost
The salary Charles could earn if he worked as an accountant
The wages and utility bills that Charles pays
The rental income Charles could receive if he chose to rent out his showroom.
The wholesale cost for the guitars that Charles pays the manufacturer
Complete the following table by determining Charles's accounting and economic profit of his guitar business.
Profit
(Dollars)
Accounting Profit
Economic Profit

Added by Michael H.

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