Emily recently graduated with a B.A. in economics and was offered a job with a small but growing company for $40,000 per year.About the same time, Emily inherited $62,000. She decided to pass up the job and use her inheritance to purchase a bubble tea shoprather than put the money into a bond fund (as her uncle suggested), which would have paid 6 percent per year interest. Emily worksfull-time at her new business, and at the end of the year she had revenues of $83,000 and total explicit costs of$41,000.a. What was Emily's accounting profit or loss for the year?Accounting profit$42,000b. What was her economic profit or loss for the year?Economic Loss$7,600

Explicit costs are actually incurred and payable during the course of running a business. For…

Emily recently graduated with a B. About the same time, Emily inherit rather than put the money into a b full-time at her new business, and a. What was Emily's accounting pr Accounting profit v:$ $[ b. What was her economic profit c Economic Loss :$

Emily recently graduated with a B. About the same time, Emily inherit rather than put the money into a b full-time at her new business, and a. What was Emily's accounting pr Accounting profit v:$ $[ b. What was her economic profit c Economic Loss :$

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Emily recently graduated with a B.A. in economics and was offered a job with a small but growing company for $40,000 per year.
About the same time, Emily inherited $62,000. She decided to pass up the job and use her inheritance to purchase a bubble tea shop
rather than put the money into a bond fund (as her uncle suggested), which would have paid 6 percent per year interest. Emily works
full-time at her new business, and at the end of the year she had revenues of $83,000 and total explicit costs of
$41,000.
a. What was Emily's accounting profit or loss for the year?
Accounting profit
$
42,000
b. What was her economic profit or loss for the year?
Economic Loss
$
7,600

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Step 1: Explain the concepts of explicit costs and implicit costs.

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Step 3: Calculate the Economic profit.

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