Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. when

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. when deciding to open her own business, she turned down three separate job offers with annual salaries of $30,000, $40,000 and $45,000. what is jacqui's economic profit from running her own business? a) $5,000b) -$5,000c) $20,000d) -$55,000

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  1. Jane's economic profit is $5,000.

    Explanation:

    Jane decides to open a business of her own and earns an accounting profit of $50,000 in the first year.  

    She turned down three job offers with salaries of $30,000, $40,000, and $45,000 to start her business.  

    Here, the opportunity cost of doing business is $45,000 as the opportunity cost is the cost of giving up the second-best alternative.  

    The accounting profit does not consider implicit or opportunity cost. But in the calculation of economic profits, the implicit cost is considered.  

    Economic profits

    = Accounting profit - Implicit cost

    = $50,000 - $45,000

    = $5,000

  2. Economic profit calculated as accounting profit minus opportunity as job offer.

    1 2 3

    Accounting profit $50 000 $50 000 $50 000

    Opportunities (job offers) $30 000 $40 000 $45 000

    Economic profit $20 000 $10 000 $5 000

    Jacqui receives economic profit $ 20,000, $10,000 and $5,000 respectively from running her own

    business.

    answer

    Jacqui’s economic profit is $ 20,000, $ 20,000, $10,000 and $5,000 respectively from running her

    own business.

  3. A. $5,000

    Explanation:

    Economic profit = Accounting profit - Implicit cost.

    = $50000 - $45000

    = $ 5,000

    Therefore, Jacqui;s economic profit from running her own business is $ 5,000.

  4. A) $5,000

    Explanation:

    Given that she turned down three separate job offers with annual salaries of $30,000, $40,000 and $45,000 and earned $50,000 in accounting profit in the first year from her business.

    The most likely option she would have opted for in place of her own business would have been the job offer of $45,000.

    As such, Jacqui's economic profit from running her own business

    = $50,000 - $45,000

    = $5,000

  5. Jacqui's economic profit from running her own business is $5,000

    Explanation:

    Economic Profit / loss is the net of of revenue made from sale of an output and all the expenses associated with that sale including opportunity cost as well.

    Economic profit = Income - Implicit Expenses - Explicit Expenses

    Implicit expenses are the opportunity costs and Explicit Expenses are all those incurred to generate the sale.

    As there is no Explicit cost. For accounting profit Calculation economists consider the best alternative as an Implicit cost. The best alternative option is $45,000

    Economic Profit = $50,000 - 45,000 = $5,000

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