Week One Applied Problems (1)

Week One Applied - Unthank 1 RUNNING TITLE Week One Applied Problems Week One Applied Problems Greg Unthank Business 640 Managerial Economics Dr

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Unthank 1 RUNNING TITLE: Week One Applied Problems Week One Applied Problems Greg Unthank Business 640: Managerial Economics Dr. Isabel Wan May 5, 2011
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Chapter 1, Applied Problem #1 A. The total explicit costs are given in the problem: $555,000 + $45,000 + $28,000 +  $165,000 = $793,000. Total implicit costs include the opportunity cost of the owner’s  $100,000, equal to the foregone interest ($15,000), and the opportunity cost of his time  ($175,000), for a total implicit cost of $190,000. Total economic costs are the sum of the  explicit and implicit costs, or $983,000. B. Accounting profit is given in the problem, $177,000 C. Economic profit is $970,000 - $983,000 = -$13,000 D. A firm’s economic profit is equal to the total revenue minus its opportunity cost and the  opportunity cost is the sum of its explicit and implicit costs.  The economic profit for the  owner of Sound Device was -$13,000 which shows a negative profit for the owner.  I  believe that the owner failed to factor in any non-pecuniary benefits that he might receive  from having his own business; his decision to start Sound Devices may not have been a  good decision. Chapter 2, Applied Problem #2
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This note was uploaded on 07/07/2011 for the course BUSINESS 350 taught by Professor Mitchell during the Fall '09 term at Troy.

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Week One Applied - Unthank 1 RUNNING TITLE Week One Applied Problems Week One Applied Problems Greg Unthank Business 640 Managerial Economics Dr

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