ECON 5705 Chap 8 Brendan O’Neal

ECON 5705 Chap 8 Brendan O’Neal - over...

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Brendan O’Neal ECON 5705 Chapter 8 Exercises 1. Evans should weigh the costs and benefits of the PhD program. Costs include time away from work (opportunity cost), costs of tuition, books, and other academic related paraphernalia. The expected income after the doctorate exceeds any year of income or expected income pre-doctorate. The cost of the loss of the opportunity cost/present income can be compared to the benefits of the career post-doctorate, to include research and teaching income, consulting, salary, potential administrative position/responsibilities (that includes a significant raise in salary), et. al. 2. After consideration, the airline should not build the training center at the proposed location due to the amount of money that could be made by selling the land and prospecting a different location for the training center. The difference in opportunity cost is vast; if sold the land is worth $2,500,000; the project is not suitable for land costing
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Unformatted text preview: over $850,000. 3. Bowen may be more financially fit if he works for someone else after he sells the farm (without consideration to other factors, and basing the decision off of finances). 4. a. Accounting profits revenues 2,000,000 Less Salaries 1,500,000 operating exp 250,000 depreciation 5,000 total 1,775,000 operating income 245,000 less in expense 75,000 profit 170,000 b. Economic profits revenues 2,000,000 Less salary 1,500,000 operating expenses 250,000 depreciation 20,000 foregone income 100,000 total 1,870,000 economic profit before costs 130,000 less int expense 75,000 profit before tax 55,000 c. explicit – salary, operating expenses, depreciation, interest implicit – foregone income and all additional depreciation that is not for tax purposes....
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This note was uploaded on 01/30/2011 for the course ECO 5705 taught by Professor Kest during the Spring '10 term at Hodges University.

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ECON 5705 Chap 8 Brendan O’Neal - over...

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