Consider the following scenario: Steven owns his own auto repair shop. He uses his own premises as a workshop. If he had rented his premises to someone else, he would have received R18 000 in rent. He initially invested R50 000 in his business to buy tools and machines. If he had invested the money, he could have eamed 10% per year on the money, which is R5 000 per year. If he did not work for himself, he could have earned a salary of R60 000. His expenditure for the year consisted of the following: Oil, petrol, sparkplugs, fan belts and other materials: R70 000 Salary for two junior mechanics: R35 000 Admin costs: R15 000 Assume that the total revenue of the auto shop is R230 000. Calculate Steve's economic profit a) R203 000 b) R110 000 c) R27 000 d) R32 000 I

Consider the following scenario: Steven owns his own auto repair shop. He uses his own premises as a workshop. If he had rented his premises to someone else, he would have received R18 000 in rent. He initially invested R50 000 in his business to buy tools and machines. If he had invested the money, he could have eamed 10% per year on the money, which is R5 000 per year. If he did not work for himself, he could have earned a salary of R60 000. His expenditure for the year consisted of the following: Oil, petrol, sparkplugs, fan belts and other materials: R70 000 Salary for two junior mechanics: R35 000 Admin costs: R15 000 Assume that the total revenue of the auto shop is R230 000. Calculate Steve's economic profit a) R203 000 b) R110 000 c) R27 000 d) R32 000 I

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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