Mary is an accountant and having an annual income of $400,000. She plans to open a bookstore and quitting her job. She has her own shop and the annual rent is $148,000. She expects the annual revenue of this bookstore could be $1,000,000. The monthly operating cost is estimated as $25,000. She would employ a shop assistant with the monthly salary of $10,000. She also needs to buy a set of computer, which costs $12,000 and the resale value in the second-hand market will be $8,000 after one year. (a) Calculate Mary's economic profit in the first year of operation. List the items and show your workings. (b) Would you recommend Mary to run the bookstore? Briefly explain.
Mary is an accountant and having an annual income of $400,000. She plans to open a bookstore and quitting her job. She has her own shop and the annual rent is $148,000. She expects the annual revenue of this bookstore could be $1,000,000. The monthly operating cost is estimated as $25,000. She would employ a shop assistant with the monthly salary of $10,000. She also needs to buy a set of computer, which costs $12,000 and the resale value in the second-hand market will be $8,000 after one year. (a) Calculate Mary's economic profit in the first year of operation. List the items and show your workings. (b) Would you recommend Mary to run the bookstore? Briefly explain.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter22: Getting Divisions To Work In The Firm’s Best Interests
Section: Chapter Questions
Problem 22.3IP
Related questions
Question
10
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning