Question

Question inside! Please explain? Thank you!! :)

Answer 1

Enrique runs a flower stall in the local shopping mall. The stall rents for $1,600 a month. Enrique buys the flowers at $2 a bunch and sells them for $3 a bunch. He'll be open seven days a week, eight hours a day, and plans to sell 100 bunches of flowers a day. He's hired Rosita to work three hours each of the five school days and eight hours each day on Saturday and Sunday. Enrique pays Rosita $6 an hour. He works at the stall whenever Rosita is not working. If Enrique didn't work at the flower stall, he'd make $10 an hour as a cook. How much accounting profit and how much economic profit does Enrique make a week? Explain how you calculated your answer (assume there are 4 weeks in a month).

How do you solve this? :/

Answer 2

this is a long question

Answer 3

So, you need to find two different numbers

Answer 4

haha yeah it's long :(

so two numbers are these right? 1) accounting profit 2) economic profit

i'm looking for those right?

Answer 5

I assume the difference between accounting profit and economic profit is how much we assume Enrique is paid ? (I don't know off-hand, but you do , right ?)

Answer 6

yes:)

so accounting profit is the total revenue minus explicit costs

and the economic profit is the total revenue minus explicit and implicit costs

(*explicit cost is the costs a firm pays in money for the resources it uses, and implicit cost is the costs a firm incurs for using resources they don't pay for.)

:D

Answer 7

^^definitions if they help :)

Answer 8

To answer the question, break it down into parts
1) how much income will there be in 1 week.
to answer, we need the number of flowers sold per week
then multiply by $3

2) how much cost per week:
rent (monthly rent/4)
cost of worker
cost of Enrique (or not depending on which profit we are figuring out)
cost of flowers
I think that is all of the costs.

Answer 9

If enrique does not pay himself, the economic profit would use $10 and accounting profit would use $0

Answer 10

ok:)

wait so did you calculate that through the things you said to consider above? like was that the step process? :O

Answer 11

@phi ?

Answer 12

Those were my thoughts on how to attack the problem. I have not done it , nor checked out the details. But it should work (and if I left out anything, you 'll probably catch it... being smarter than the average bear)

Answer 13

hahaha okay thanks!! :) so in the end, i should have the answers to come out to be $10 economic profit and $0 accounting profit? and hehe thanks:)

Answer 14

no, the $10 is how much enrique is paid per hour (implicitly)
in other words, in the problem he does not pay himself
so when you work out the profit you are figuring out the accounting profit.

But enrique is worth $10/hr, so the economic profit assumes he was paid $10/hour.

Answer 15

ohh okay:)

and so i just use that info and the process you gave above and calculate?

Answer 16

give it a try

Answer 17

ahh okay thank you @Phi!! :)