Calculate Jessie’s accounting profit and economic profit. In your opinion, should Jessie proceed with opening her own pharmacy? Justify your answer.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

Jessie, a pharmacist, is planning on opening her own pharmacy. Jessie Pharmacy is expected to

generate yearly revenue of $500,000. Jessie will run the pharmacy herself on full-time basis.

Jessie’s alternative employment options are as follows:

- Continue to work as a senior medical representative for $50,000 per year.

- Accepts a research position in another company for $70,000 per year.

Jessie expects to spend $350,000 per year on purchasing drugs and cosmetics for resale to her

customers. She will also need to hire three employees: an assistant, an accountant and a

custodian, for whom the total salaries to be paid are expected to be $48,000 per year. Jessie

owns the building in which her pharmacy is supposed to be; however, she could rent the

pharmacy-store space out for $42,000 per year.

Calculate Jessie’s accounting profit and economic profit. In your opinion, should Jessie proceed

with opening her own pharmacy? Justify your answer.

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Accounting Profits
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education