Problem 08-01 (Algo) Refer to the table below. The table shows the monthly econo

Question

Problem 08-01 (Algo) Refer to the table below. The table shows the monthly economic profit of a drugstore. otal month ess explicit costs Cost of merchandise sold $17.000 Rent and utilities Taxes Total explicit costs ccounting profit (revenue minus explicit costs) 56 implicit costs 53.0 Total implicit costs $4 52,0 mic profit (revenue minus all costs) If the owner of the drugstore hired a manager for $16 an hour to take his place, how much of a change would show up in Instructions: Enter your responses as a whole number. Indicate a negative response with a (-) negative sign (a) Accounting profits per month? b) Economic profits per month?

Explanation / Answer

Manager salary will be added to the explicit cost-

Total salary of manager = 16* 300 = $4800

So explicit cost will be increased by $4800, so accounting profit will be decreased by 4800

Accounting profit = 6000 – 4800 = 1200

Since services of the owner is no more required, wage of the owner will be saved

Owner wage = 3000

So economic profit = 1200 – 1000 = 200

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