Accounting costs, profits, Economics profit
Not what you're looking for?
(A). A potential entrepreneur is trying to decide whether to open a new health spa. She presently makes $35,000 per year as an aerobics instructor and will have to give up this job if she opens the new spa. If she chooses to open spa, it will cost her $200,000 per year in rent and other operating expenses.
1. What are her accounting costs?
2. What are her opportunity costs?
3. How much would she need to make in revenues to earn positive accounting profits? Positive economic profit?
4. If a firm makes positive economic profit it means that the firm earns normal profit. True or false? Comment.
(B). 4. Production function specifies the maximum output that can be produced given varying degrees of technological progress. True or false, explain.
Purchase this Solution
Solution Summary
Accounting costs, profits, Economics profit
Solution Preview
1) Her accounting costs are @200,000. Please not that we have not added or included cost of capital here as no information about the source of capital is given. If the amount to run the business is a borrowed money, interest cost of capital should be included.
2) Opportunity cost in this case will be @35,000. Again, as no information about the capital invested is given, we have not included the opportunity cost of the capital invested. Opportunity cost is the cost of the next best alternative, ie, the amount which ...
Education
- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
Recent Feedback
- "Thank you. "
- "Thank you"
- "Thank you. I got 20/20 last week for my discussion you help me out with."
- "Thank you. Great Job. "
- "Thank you. Great Job. "
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.