...average year, he receives....? $950,000 from sales of pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $500,000; he also pays wages and utility bills totaling $150,000. If he does not operate this piano business, he can work in an accounting firm and receive an annual salary of $55,000. He owns his showroom; if he chooses to rent it out, he will receive $30,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. No other costs are incurred in running this piano business.
What are Hubert's explicit costs of selling pianos? Check all that apply
a) the salary Hubert could earn if he worked in an accounting firm
b) The wages and utility bills that Hubert pays
c) the wholesale cost for the pianos that Hubert pays the manufacturer
d) the rental income Hubert could receive per year if he chose to rent his showroom out
2) What is the accounting profit of Hubert's piano business?
a) $300,000
b) $215,000
c) $245,000
d) $950,000
e) -$215,000 ($215,000 acounting loss)
3) What is the economic profit of Hubert's piano business?
a) -$215,000 ($215,000 economic loss)
b) $215,000
c) $300,000
d) $950,000
e) $245,000
Taking into account Hubert's implicit (opportunity) costs of doing business as well as his explicit costs, if Hubert's only goal is to earn as much economic profit as possible, he ____________
a) should not
b) should
continue to stay in the piano business.
What are Hubert's explicit costs of selling pianos? Check all that apply
a) the salary Hubert could earn if he worked in an accounting firm
b) The wages and utility bills that Hubert pays
c) the wholesale cost for the pianos that Hubert pays the manufacturer
d) the rental income Hubert could receive per year if he chose to rent his showroom out
2) What is the accounting profit of Hubert's piano business?
a) $300,000
b) $215,000
c) $245,000
d) $950,000
e) -$215,000 ($215,000 acounting loss)
3) What is the economic profit of Hubert's piano business?
a) -$215,000 ($215,000 economic loss)
b) $215,000
c) $300,000
d) $950,000
e) $245,000
Taking into account Hubert's implicit (opportunity) costs of doing business as well as his explicit costs, if Hubert's only goal is to earn as much economic profit as possible, he ____________
a) should not
b) should
continue to stay in the piano business.