Sam lives in San Diego and operates a small company selling bikes. On average, he receives $694,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $392,000. He also pays several utility companies, as well as his employees wages totaling $289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $2,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Sam does not operate the bike business, he can work as a programmer and earn a yearly salary of $20,000 with no additional monetary costs, and rent out his storefront at the $2,000 per year rate. There are no other costs faced by Sam in running this bike company. Identify each of Sam’s costs in the following table as either an implicit cost or an explicit cost of selling bikes.   Implicit Cost Explicit Cost The wages that Sam pays       The rental income Sam could receive if he chose to rent out his showroom       The salary Sam could earn if he worked as a programmer       The wholesale cost for the bikes that Sam pays the manufacturer         Complete the following table by determining Sam’s accounting and economic profit of his bike business.   Profit (Dollars) Accounting Profit   Economic Profit

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Sam lives in San Diego and operates a small company selling bikes. On average, he receives $694,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $392,000. He also pays several utility companies, as well as his employees wages totaling $289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $2,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Sam does not operate the bike business, he can work as a programmer and earn a yearly salary of $20,000 with no additional monetary costs, and rent out his storefront at the $2,000 per year rate. There are no other costs faced by Sam in running this bike company.
Identify each of Sam’s costs in the following table as either an implicit cost or an explicit cost of selling bikes.
 
Implicit Cost
Explicit Cost
The wages that Sam pays
 
 
 
The rental income Sam could receive if he chose to rent out his showroom
 
 
 
The salary Sam could earn if he worked as a programmer
 
 
 
The wholesale cost for the bikes that Sam pays the manufacturer
 
 
 
 
Complete the following table by determining Sam’s accounting and economic profit of his bike business.
 
Profit
(Dollars)
Accounting Profit
 
Economic Profit
 
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