microeconomics book solution 9

# microeconomics book solution 9 -...

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Solution Solution S-128 CHAPTER 9 MAKING DECISIONS 2. a. Jackie’s accounting profit is: Total revenue \$5,000. (The only cost that her accountant would add into the accounting profit calculation is depreciation.) For her accounting profit to be just equal to zero, her total revenue would have to be \$5,000. b. Jackie’s economic profit is: Total revenue \$5,000 \$2,000 \$60,000 = Total revenue \$67,000. (Depreciation, the opportunity cost of not renting out the room, and the opportunity cost of Jackie’s time are all costs that figure into the calculation of economic profit.) For this to be just equal to zero, Jackie’s total rev- enue would have to be \$67,000. 3. You own and operate a bike store. Each year, you receive revenue of \$200,000 from your bike sales, and it costs you \$100,000 to obtain the bikes. In addition, you pay \$20,000 for electricity, taxes, and other expenses per year. Instead of running the bike store, you could become an accountant and receive a yearly salary of \$40,000. A large clothing retail chain wants to expand and offers to rent the store from you for \$50,000 per year. How do you explain to your friends that despite making a profit, it
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## This note was uploaded on 01/19/2011 for the course ECON 11853 taught by Professor Brianallenhunt during the Spring '10 term at Georgia State University, Atlanta.

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microeconomics book solution 9 -...

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