3. Exercise 8.3Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary isconsidering establishing her own real estate agency. She expects to generate revenues during the first year of $2 million. Salaries paid to heremployees are expected to total $1.50 million. Operating expenses (e.g., rent, supplies, utility services) are expected to total $250,000. To begin thebusiness, Mary must borrow $300,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the valueof this equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year.What is the (pre-tax) accounting profit for this venture?$185,000.00$200,000.00$85,000.00$100,000What is the (pre-tax) economic profit for this venture?$85,000.00$200,000.00$185,000.00$100,000

1. Pre-tax Accounting Profit:Accounting profit is the difference between total revenue and explicit…

Answered: 3. Exercise 8.3 Mary Graham has worked…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 16RQ: What are the factor payments for land, labor, and capital?

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Sandra lives in Melbourne and runs a business that sells guitars. In an average year, she receives $2.6 millionfrom sales of guitars. Of this sales revenue, she must pay the manufacturer a wholesale cost of $1,400,000. She also pays wages and utility bills totalling $1,100,000. If she does not operate this guitar business, she can work in an accounting firm and receive an annual salary of $70,000. She owns her showroom. If she chooses to rent it out, she will receive $50,000 in rent per year. Assume that the value of this showroom does not depreciate during the year. No other costs are incurred in running this guitar business. What is Sandra’s accounting profit (used for tax purposes)? What is her economic profit?
Consider the following example: Jordan currently works for a corporate law firm. She is considering opening her own independent legal practice, where she expects to earn $300,000 per year once she gets established. To run her own firm, she willI have to give up her current job with a salary of $165,000 and will incur the following annual expenses: Rent 22,490 Salary-Legal Assistant Computer Software License Office Supplies 21,830 120 800 Internet Subscription 1,750 How much are Jordan's explicit costs? Number How much is Jordan's accounting profit? Number How much are Jordan's implicit costs? Number How much is Jordan's economic profit? Number Assume Jordan values her leisure time at $80/hour, and starting her own firm would require her to put in 15 more hours than at the corporate firm: What is the change in Jordan's explicit costs? Number What is the change in Jordan's implicit costs? Number
2 You run a business selling used hand tools. The rent on your building is $1400/month. Utilities average $600 month. Your average cost to buy your used hand tools from a wholesaler is $9.5/tool. You spend S0.50/tool to package and individually price them. You have two employees in your store during the opening hours that sell the tools. Each employee gets a salary of $12/hour. Your store is open 10 hours/day, every day of the week. Over the course of a year, this averages out to 30 days'month. The average selling price for a used tool is $22. How many tools per month must be sold to make $4000 profit each month.
11
2. Profit maximization A profit-maximizing firm will use more of a factor of production when: The marginal physical product of the additional factor unit is greater than the marginal revenue product (MRP) of the additional factor unit. The extra cost of using an additional factor unit is less than the marginal physical product of the additional factor unit. The extra cost of using an additional factor unit is less than the marginal revenue product of the additional factor unit. The marginal physical product of the additional factor unit is less than the marginal revenue product of the additional factor unit. Apply your answer as an argument to the labor market-when the wage rate is above the MRP, the firm should hire Therefore, what is the relationship between a perfectly competitive firm's MRP curve for an input and that firm's demand curve for that input? The firm's demand curve for an input is the downward-sloping portion of the MRP curve. workers. They are identical except for the…
Sam owns and operates ye olde yogurt shoppe. His revenue this year was $135,000. he paid food supplier $50,000 for fruit, yogurt and milk and paid $5000 For paper and cleaning supplies. In addition to working again the store himself, he hired student lady to work part time and it cost him $25,000 in labor costs. He paid $12,500 to rent his store. He borrowed money from bank and had to pay them $5000 in interest costs. To run his company, sam gave up $50000 per year job and $1500 in interest amount he put into the business. He estimates that companies similar to his earn at least $6750 over costs. 1. separate(list) sam's accounting costs into fixed costs be variable costs by name and amount. 2. list each of sam's implicit costs by name and amount 3. calculate sam's economic profit/loss. Show what costs are included, and if Sam expects the Sam revenue and costs next year, he should continue in this business? Why/ why not?
4-2 Game Day Shuttle Service You run a game day shuttle service for parking services for the local ball club. Your costs for different customer loads are 1: $30, 2: $32, 3: $35, 4: $38, 5: $42, 6: $48, 7: $57, and 8: $68. What are your MCs for each customer load level? What is the AC? If you are compensated $10 per ride, what customer load would you want?
12.
1-18 Katherine D’Ann is planning to finance her college education by selling programs at the football games for State University. There is a fixed cost of $400 for printing these programs, and the variable cost is $3. There is also a $1,000 fee that is paid to the university for the right to sell these programs. If Katherine was able to sell programs for $5 each, how many would she have to sell in order to break even?
Dennis, a potato farmer, earns $400,000/month in revenue. His monthly cost include: administrative cost: $30,000, fertilizers: $50,000, equipment and maintenance: $35,000, Labor: $73,000, Transportation: $15,000, Miscellaneous: $10,000, Foregone rent for the land is $20,000, and the owner’s salary is $20,000. Dennis's economic profit is ______. Group of answer choices $147,000 $167,000 $187,000
Microeconomics Jon quit his job as a manager at West End Savings bank where he earned $112,000 a year. He cashed in $214,000 in corporate bonds that earned 1.0% interest annually to set up a gym. Jon has decided to buy a store front and set up exercise classes. There are 1400 people who will pay $1200 a year for unlimited classes; $850 from each person goes for instructors, maintenance, equipment, insurance, depreciation etc. Write the answers to the following questions on the answer sheet. (You must show your work.) A.What are Jon’s total revenues? B. What are Jon’s explicit costs? In numbers C.What is his accounting profit? in numbers D. List 2 (in numbers) 2 implicit costs that Jon has not included. E. What is Jon’s pure economic profit (or loss) in numbers?
4. Exercise 9.4 If the Occupational Safety and Health Administration (OSHA) requires a firm to install new ventilating equipment in its plant, then its break-even point will . (Assume that all other factors remain unchanged and that this action has no effect on worker productivity.)

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