assignment 2 - Chien Chiu Hsiung Econ 20.1 Professor Sardy...

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Chien Chiu Hsiung Econ 20.1 Professor Sardy March 23, 2010 Assignment 2: Chapter 9, problem 1 At first glance, it might seems that Hiro have profited $45,000 because his yearly revenue is $100,000 and he spent $55,000 on travel to clients and other expenses. When he added the yearly depreciation of the computer he owns about $2,000. His actual accounting profit is $43,000. Depreciation occurs because over time his computer breaks down or become part of the old technology as new and powerful computer become available in the market. The yearly depreciation is based on his estimate to be the reduction of his computer due to minor wear and tear. Accounting profit can help people decide whether to keep their company running or do something else to gain profits. In this case, deciding whether Hiro should continues working as a consultant or he could teach economics at a small college. The economic profit is different from the accountant profit because Hiro may have implicit costs over the explicit cost. If Hiro did not
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assignment 2 - Chien Chiu Hsiung Econ 20.1 Professor Sardy...

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