Kevin quits his computer programming job, where he was earning a salary of $60,000 per year, to start his own computer software business in a building that he owns and was previously renting out for $24,000 per year. In his first year of business, he has the following expenses: salary paid to himself, $40,000; rent, $0; other actual expenses, $25,000. Calculate the accounting cost and the economic cost associated with Kevin’s computer software business. If Kevin’s total revenue for the first year was $70,000 how much revenue would his business need to generate to earn positive economic profit? Explain briefly.
Kevin quits his computer programming job, where he was earning a salary of $60,000 per year, to start his own computer software business in a building that he owns and was previously renting out for $24,000 per year. In his first year of business, he has the following expenses: salary paid to himself, $40,000; rent, $0; other actual expenses, $25,000. Calculate the accounting cost and the economic cost associated with Kevin’s computer software business. If Kevin’s total revenue for the first year was $70,000 how much revenue would his business need to generate to earn positive economic profit? Explain briefly.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis
Section: Chapter Questions
Problem 9TY
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Kevin quits his computer programming job, where he was earning a salary of $60,000 per year, to start his own computer software business in a building that he owns and was previously renting out for $24,000 per year. In his first year of business, he has the following expenses: salary paid to himself, $40,000; rent, $0; other actual expenses, $25,000. Calculate the accounting cost and the economic cost associated with Kevin’s computer software business. If Kevin’s total revenue for the first year was $70,000 how much revenue would his business need to generate to earn positive economic profit? Explain briefly.
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