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Dmitri lives in Houston and runs a business that sells pianos. In an average year, he receives $ 7 2 2 , 0 0 0
Dmitri lives in Houston and runs a business that sells pianos. In an average year, he receives $ from selling pianos. Of this sales revenue, he
must pay the manufacturer a wholesale cost of $; he also pays wages and utility bills totaling $ He owns his showroom; if he chooses
to rent it out, he will receive $ in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Dmitri does
not operate this piano business, he can work as a paralegal and receive an annual salary of $ with no additional monetary costs. No other costs
are incurred in running this piano business.
Identify each of Dmitri's costs in the following table as either an implicit cost or an explicit cost of selling pianos.
Complete the following table by determining Dmitri'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 Dmitri's goal is to maximize his economic profit, he
True or false: Dmitri is earning a normal profit.
stay in the piano business.
True
False
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