Andrew lives in Houston and operates a small company selling drones. On average, he receives $773,000 per year from selling drones. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $452,000. He also pays several utility companies, as well as his employees wages totaling $277,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $3,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Andrew does not operate the drone business, he can work as a nurse and earn a yearly salary of $32,000 with no additional monetary costs, and rent out his storefront at the $3,000 per year rate. There are no other costs faced by Andrew in running this drone company. Identify each of Andrew's costs in the following table as either an implicit cost or an explicit cost of selling drones. The salary Andrew could earn if he worked as a nurse The wholesale cost for the drones that Andrew pays the manufacturer The rental income Andrew could receive if he chose to rent out his showroom The wages that Andrew pays Implicit Cost Explicit Cost Complete the following table by determining Andrew's accounting and economic profit of his drone business. Accounting Profit Economic Profit Profit (Dollars)
Andrew lives in Houston and operates a small company selling drones. On average, he receives $773,000 per year from selling drones. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $452,000. He also pays several utility companies, as well as his employees wages totaling $277,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $3,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Andrew does not operate the drone business, he can work as a nurse and earn a yearly salary of $32,000 with no additional monetary costs, and rent out his storefront at the $3,000 per year rate. There are no other costs faced by Andrew in running this drone company. Identify each of Andrew's costs in the following table as either an implicit cost or an explicit cost of selling drones. The salary Andrew could earn if he worked as a nurse The wholesale cost for the drones that Andrew pays the manufacturer The rental income Andrew could receive if he chose to rent out his showroom The wages that Andrew pays Implicit Cost Explicit Cost Complete the following table by determining Andrew's accounting and economic profit of his drone business. Accounting Profit Economic Profit Profit (Dollars)
Chapter25: Monopoly
Section: Chapter Questions
Problem 13E
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Transcribed Image Text:Andrew lives in Houston and operates a small company selling drones. On average, he receives $773,000 per year from selling drones. Out of this
revenue from sales, he must pay the manufacturer a wholesale cost of $452,000. He also pays several utility companies, as well as his employees
wages totaling $277,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $3,000 in
rent. Assume there is no depreciation in the value of his property over the year. Further, if Andrew does not operate the drone business, he can work
as a nurse and earn a yearly salary of $32,000 with no additional monetary costs, and rent out his storefront at the $3,000 per year rate. There are
no other costs faced by Andrew in running this drone company.
Identify each of Andrew's costs in the following table as either an implicit cost or an explicit cost of selling drones.
The salary Andrew could earn if he worked as a nurse
The wholesale cost for the drones that Andrew pays the manufacturer
The rental income Andrew could receive if he chose to rent out his showroom
The wages that Andrew pays
Implicit Cost Explicit Cost
Complete the following table by determining Andrew's accounting and economic profit of his drone business.
Accounting Profit
Economic Profit
Profit
(Dollars)
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