Big Salaries
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#3
"People who earn big salaries are less likely to go into business for themselves than people who earn small salaries because their implicit costs are higher" (Arnold, 2001). Do you agree or disagree? Explain your answer using real world examples or experiences.
#4
People often believe that large firms in an industry have cost advantages over smaller firms in the same industry. For example, they might think a big retailer has a cost advantage over a small retailer. For this to be true, what condition must exist? Explain your answer using economic concepts and personal experiences.
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Solution Summary
This solution discusses whether or not people are less likely to leave a comfortable job and start a business of their own. This solution takes the position that a person is less likely to leave the job rather than start their own business and the reasoning behind that position.
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"People who earn big salaries are less likely to go into business for themselves than people who earn small salaries because their implicit costs are higher" (Arnold, 2001). Do you agree or disagree? Explain your answer using real world examples or experiences.
I certainly do agree to a certain extent that people are less likely to leave a comfortable living to start a business themselves. Generally people do not like to take risks associated with their livelihood. If a person is making $150k per year, they may be less likely to quite their job to build a business and the stress of doing so. Implicit costs are things like no income (or very low), risks such as stress of building a business that may or may not be successful. When an employee making $20k per year quits their job, they too may also be less likely to leave their job, but there are fewer risks involved.
There are many other reasons why a person will leave a comfortable salary to venture off on their own. Some people just have an entrepreneurial ...
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