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2. Definition of economic costs Shen lives in San Francisco and runs a business that sells pianos. In an average year, he receives $724,000 from selling panas. 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, I does not operate this piano business, he can work as a peralegal and receive an annual salary of $21,000 with no additional monetary costs. No other costs are incurred in running this plane business. Identify each of Shen's costs in the following table as either an implicit cast or an explicit cost of selling planas So, if Shen The salary shen could earn if he worked as a paralegal The wages and utility bills that Shen pays The wholesale cost for the planes that Shen pays the manufacturer The rental income Shen could receive if he chose to rent out his showroom Implicit Cost Explicit Cost Complete the following table by determining Snon's accounting and economic profit of his piano business. Profit (Dollars) Accounting Profit Economic Profit Alternatively, the economic profit he would earn as a paralegal would be If Shen's goal is to maximize his economic profit, he stay in the piano business. True or false: Shen is not earning a normal profit because his profit is positive. False True

2. Definition of economic costs Shen lives in San Francisco and runs a business that sells pianos. In an average year, he receives $724,000 from selling panas. 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, I does not operate this piano business, he can work as a peralegal and receive an annual salary of $21,000 with no additional monetary costs. No other costs are incurred in running this plane business. Identify each of Shen's costs in the following table as either an implicit cast or an explicit cost of selling planas So, if Shen The salary shen could earn if he worked as a paralegal The wages and utility bills that Shen pays The wholesale cost for the planes that Shen pays the manufacturer The rental income Shen could receive if he chose to rent out his showroom Implicit Cost Explicit Cost Complete the following table by determining Snon's accounting and economic profit of his piano business. Profit (Dollars) Accounting Profit Economic Profit Alternatively, the economic profit he would earn as a paralegal would be If Shen's goal is to maximize his economic profit, he stay in the piano business. True or false: Shen is not earning a normal profit because his profit is positive. False True

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Cost Of Production
Section: Chapter Questions
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2. Definition of economic costs Shen lives in San Francisco and runs a business that sells pianos. In an average year, he receives $724,000 from selling pianos. 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; 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 Shen does not operate this piano business, he can work es a paralegal and receive an annual salary of $21,000 with no additional monetary costs. No other casts are incurred in running this plane business. Identify each of Shen's costs in the following table as either an implicit cast or an explicit cost of selling plance The salary Shen could earn if he worked as a paralegal The wages and utility bills that Shen pays The wholesale cast for the planes that Shen pays the manufacturer The rental income Shen could receive if he chose to rent out his showroom Implicit Cost Explicit Cost Complete the following table by determining Shen's accounting and economic profe of his piano business. Profit (Dollars) Accounting Profit Economic Profit Alternatively, the economic profit he would earn as a paralegal would be If Shen's goal is to maximize his economic profit, he stay in the piano business. True or false: Shen is not earning a normal profit because his profit is positive. False True
Transcribed Image Text:2. Definition of economic costs Shen lives in San Francisco and runs a business that sells pianos. In an average year, he receives $724,000 from selling pianos. 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; 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 Shen does not operate this piano business, he can work es a paralegal and receive an annual salary of $21,000 with no additional monetary costs. No other casts are incurred in running this plane business. Identify each of Shen's costs in the following table as either an implicit cast or an explicit cost of selling plance The salary Shen could earn if he worked as a paralegal The wages and utility bills that Shen pays The wholesale cast for the planes that Shen pays the manufacturer The rental income Shen could receive if he chose to rent out his showroom Implicit Cost Explicit Cost Complete the following table by determining Shen's accounting and economic profe of his piano business. Profit (Dollars) Accounting Profit Economic Profit Alternatively, the economic profit he would earn as a paralegal would be If Shen's goal is to maximize his economic profit, he stay in the piano business. True or false: Shen is not earning a normal profit because his profit is positive. False True
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