Answer Happy

Carlos lives in Detroit and runs a business that sells planos. In an average year, he receives $722,000 from selling planos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $422,000; he also pays wages and utility bills totaling $268,000. He owns his showroom; if he chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Carlos does not operate this piano business, he can work as a paralegal and receive an annual salary of $21,000 with no additional monetary costs. No other costs are incurred in running this piano business. Identify each of Carlos's costs in the following table as either an implicit cost or an explicit cost of selling planos. Implicit Cost Explicit Cost The wages and utility bills that Carlos pays The rental income Carlos could receive if he chose to rent out his showroom The wholesale cost for the pianos that Carlos pays the manufacturer The salary Carlos could earn if he worked as a paralegal ● O

Complete the following table by determining Carlos's accounting and economic profit of his piano business. Accounting Profit Economic Profit Profit (Dollars) Alternatively, the economic profit he would earn as a paralegal would be $ 32,000 9,000 If Carlos's goal is to maximize his economic profit, he should not stay in the piano business. True True or false: Carlos is not earning a normal profit beca False should should not is positive.