After graduation, you face a choice. You can work for a multinational consulting firm and earn a starting salary (including benefits) of $40,000, or you can start your own consulting firm using $5,000 of your own savings. If you keep your money in a savings account, you can earn an interest rate of 7 percent. You choose to start your own consulting firm. At the end of the first year, you add up all of your expenses and revenues. Your expenses include $14,000 for rent, $1,000 for office supplies, $24,000 for labor, and $4,500 for telephone expenses. After operating your consulting firm for a year, your total revenues are $88,000. Instructions: Enter your answers as a whole number. a. What is your accounting profit? 2$ b. What is your economic profit?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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After graduation, you face a choice. You can work for a multinational consulting firm and earn a
starting salary (including benefits) of $40,000, or you can start your own consulting
firm using $5,000 of your own savings. If you keep your money in a savings account, you can earn
an interest rate of 7 percent. You choose to start your own consulting firm. At the end of the first
year, you add up all of your expenses and revenues. Your expenses include $14,000 for rent,
$1,000 for office supplies, $24,000 for labor, and $4,500 for telephone expenses. After operating
your consulting firm for a year, your total revenues are $88,000.
Instructions: Enter your answers as a whole number.
a. What is your accounting profit?
2$
b. What is your economic profit?
2$
Transcribed Image Text:After graduation, you face a choice. You can work for a multinational consulting firm and earn a starting salary (including benefits) of $40,000, or you can start your own consulting firm using $5,000 of your own savings. If you keep your money in a savings account, you can earn an interest rate of 7 percent. You choose to start your own consulting firm. At the end of the first year, you add up all of your expenses and revenues. Your expenses include $14,000 for rent, $1,000 for office supplies, $24,000 for labor, and $4,500 for telephone expenses. After operating your consulting firm for a year, your total revenues are $88,000. Instructions: Enter your answers as a whole number. a. What is your accounting profit? 2$ b. What is your economic profit? 2$
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