BUS 640 Managerial Economics WK1

BUS 640 Managerial Economics WK1 - Jennifer Baxter BUS 640...

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Jennifer Baxter BUS 640 Managerial Economics Wk 1 Assignment Chapter 1: Applied Problem 1 A) What are the total explicit, total implicit, and total economic costs in 2010? Explicit costs = monetary opportunity costs of using market-supplied resources $555,000 Implicit costs = nonmonetary opportunity costs of using owner-supplied resources $175,000 + 15,000 = $190,000 Economic costs = explicit + implicit $555,000 + 190,000 = $745,000 B) What is accounting profit in 2010? Accounting profit = total revenue – explicit costs $970,000 - 555,000 = $415,000 C) What is economic profit in 2010? Economic profit = total revenue – total economic cost $970,000 - 745,000 = 225,000 D) Given your answer in part c, evaluate the owner’s decision to leave his job to start Sound Devices? I believe the owner’s decision to leave his job to start Sound Devices was a smart one. By leaving behind a $175,000 salary and starting his own business, the audio engineer increased his annual income by $50,000. Despite high operating costs, the business’s net
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This note was uploaded on 08/29/2011 for the course BUSINESS 101 taught by Professor All during the Spring '11 term at Ashford University.

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BUS 640 Managerial Economics WK1 - Jennifer Baxter BUS 640...

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