Mary is an accountant and having an annual income of $400,000. She plans to open a bookstore and quitting her job. She has her own shop and the annual rent is $148,000. She expects the annual revenue of this bookstore could be $1,000,000. The monthly operating cost is estimated as $25,000. She would employ a shop assistant with the monthly salary of $10,000. She also needs to buy a set of computer, which costs $12,000 and the resale value in the second-hand market will be $8,000 after one year. (a) Calculate Mary's economic profit in the first year of operation. List the items and show your workings. (b) Would you recommend Mary to run the bookstore? Briefly explain.

Mary is an accountant and having an annual income of $400,000. She plans to open a bookstore and quitting her job. She has her own shop and the annual rent is $148,000. She expects the annual revenue of this bookstore could be $1,000,000. The monthly operating cost is estimated as $25,000. She would employ a shop assistant with the monthly salary of $10,000. She also needs to buy a set of computer, which costs $12,000 and the resale value in the second-hand market will be $8,000 after one year. (a) Calculate Mary's economic profit in the first year of operation. List the items and show your workings. (b) Would you recommend Mary to run the bookstore? Briefly explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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