Eric lives in Denver and operates a small-company selling bikes. On average, he receives $773,000 per year from selling bikes. 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 Eric does not operate the bike 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 Eric in running this bike company. Identify each of Eric's costs in the following table as either an implicit cost or an explicit cost of selling bikes. Implicit Cost Explicit Cost The rental income Eric could receive if he chose to rent out his showroom. The salary Eric could earn if he worked as a nurse The wholesale cost for the bikes that Eric pays the manufacturer The wages that Eric pays Complete the following table by determining Eric's accounting and economic profit of his bike business. Accounting Profit Economic Profit Profit (Dollars)
Eric lives in Denver and operates a small-company selling bikes. On average, he receives $773,000 per year from selling bikes. 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 Eric does not operate the bike 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 Eric in running this bike company. Identify each of Eric's costs in the following table as either an implicit cost or an explicit cost of selling bikes. Implicit Cost Explicit Cost The rental income Eric could receive if he chose to rent out his showroom. The salary Eric could earn if he worked as a nurse The wholesale cost for the bikes that Eric pays the manufacturer The wages that Eric pays Complete the following table by determining Eric's accounting and economic profit of his bike business. Accounting Profit Economic Profit Profit (Dollars)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Eric lives in Denver and operates a small-company selling bikes. On average, he receives $773,000 per year from selling bikes. 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 Eric does not operate the bike 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 Eric in running this bike company.
Identify each of Eric's costs in the following table as either an implicit cost or an explicit cost of selling bikes.
Implicit Cost
Explicit Cost
The rental income Eric could receive if he chose to rent out his showroom.
The salary Eric could earn if he worked as a nurse
The wholesale cost for the bikes that Eric pays the manufacturer
The wages that Eric pays
Complete the following table by determining Eric's accounting and economic profit of his bike business.
Profit
Accounting Profit
Economic Profit
(Dollars)
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