Susan quit her job as a teacher, which paid her $48,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest per year, which she also spent on equipment. For the past several months she has spent $1000 per month on ingredients and other variable costs. Also, for the past several months she has taken in $4700 in monthly revenue. What should Susan do in the short run and the long run? In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms. In the short run, Susan should shut down her business, and in the long run, she should exit the industry. In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.

Susan quit her job as a teacher, which paid her $48,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest per year, which she also spent on equipment. For the past several months she has spent $1000 per month on ingredients and other variable costs. Also, for the past several months she has taken in $4700 in monthly revenue. What should Susan do in the short run and the long run? In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms. In the short run, Susan should shut down her business, and in the long run, she should exit the industry. In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.6P

See similar textbooks

Similar questions

John was a high school teacher earning a net salary of $54,000 per year. After working for one year, he quit his job to start his own milk bar business. In order to start the business, John borrowed $40,000.00 from the bank and was paying 5 percent interest per year. Also, John withdrew $ 50,000 from his savings account. He had been earning 5 percent interest per year for this account. John’s first year of business can be summarised as follows: Item Amount $ Revenue- Fresh milk section 250,000 Revenue- Yogurt Section 180,000 2 Cashiers expense (wages per worker) (40,000) Truck expense (80,000) Manager expense (60,000) Milk sales assistant expense (30,000) Equipment expense (50,000) Motorcycle expense to ease movement in city (30,000) 2 milk freezers (cost per freezer) (5000) Based on your calculations of accounting profit and economic profit, would you advise John to return to his teaching job or continue with the…
John was a high school teacher earning a net salary of $54,000 per year. After working for one year, he quit his job to start his own milk bar business. In order to start the business, John borrowed $40,000.00 from the bank and was paying 5 percent interest per year. Also, John withdrew $ 50,000 from his savings account. He had been earning 5 percent interest per year for this account. John’s first year of business can be summarised as follows: Based on your calculations of accounting profit and economic profit, would you advise John to return to his teaching job or continue with the milk bar business? Show your work!
I am having trouble understanding how to calculate the economic and accounting profits for this question. I know that Accounting profit is Revenue - all costs, but based on how this question is phrased, it isn't clear exactly what is being considered revenues and costs incurred. If you could help me understand these calcualations better, that would be great! Thanks!
According to the Descartes' rule, the number of positive i* value for the following cash flow is:
c) What is the monthly profit or loss if the company stays with Clunker and sells 90,000 bags per month? The monthly profit or loss if the company stays with Clunker and sells 90,000 bags per month is $enter your response here. (Round your response to the nearest dollar and include a minus sign if necessary.)
A 40,000 SF office property has reimbursable operating expenses of $240,000. One tenant, has a full service gross lease on 8,000 SF at $18.50 per foot with a $2.00 expense stop. What is their effective rent? O $20.50 O $21.00 O $21.50 O $22.00 O $22.50
In a new, highly automated factory, labor costs are expected to decrease at an annual compound rate of 5%; material costs are expected to increase at an annual compound rate of 6%; and energy costs are expected to increase at an annual compound rate of 3%. The labor, material, and energy costs the first year are $3 million, $2 million, and $1,500,000. a. What will be the value of each cost during each of the first 5 years? b. Using an interest rate of 10% compounded annually, what uniform annual costs over a 5-year period would be equivalent to the cumulative labor, material, and energy costs?
please dont provide handwritten image and image based answer thanku
INTEGRATIVE CASE After working for years as a regional manager for a retail organization, Scott Parry opened his own business with Susan Gonzalez, one of his district managers, as his partner. They formed S&S to sell appliances and consumer electronics. Scott and Susan pursued a "clicks and bricks" strategy by renting a building in a busy part of town and adding an electronic storefront. Scott and Susan invested enough money to see them through the first six months. They will hire 15 employees within the next two weeks-three to stock the shelves, four sales rep- resentatives, six checkout clerks, and two to develop and maintain the electronic storefront. Scott and Susan will host S&S's grand opening in five weeks. To meet that deadline, they have to address the following important issues: 1. What decisions do they need to make to be successful and profitable? For example: a. How should they price products to be competitive yet earn a profit? b. Should they extend credit, and, if so, on…
Question: Your client is asking you to design a Flux Capacitor. The Flux Capacitor is expected to cost $5,200 to build. If operations and maintenance costs are anticipated to be 15% of the build costs the first year of operation and operation and maintenance costs will increase by 6% each year after, how much will your client have invested in the Flux Capacitor after 5 years? Notes from instructor: I have had a few questions about the Econ. Assignment. I want to clarify that the 6% interest rate does not accumulate over 4 years and it is not added to the 15%. If something increases by the interest it is (1+i) each year. I recommend finding the cost of each year and then summing them up. The equation is not direct from the FE manual so this is going to best your best course of action for now.
Upgrading an Organization’s ComputersYour organization earns $50 million in annual sales, has 500 employees, andplans to acquire 250 new mobile computers this year along with another 250next year. The goal is to issue every employee a company-owned computer,which they can use at work and at home. The computers will be loaded withantivirus software and productivity software to meet each employee’s business needs. Your organization has decided it will purchase the computersfrom the same manufacturer to obtain a quantity purchase discount. To theextent possible, the goal is to have the same hardware and software foreveryone to simplify the troubleshooting and support of the computers. Thechief financial officer has asked you to lead a project team to define users’computer hardware needs and recommend the most cost-effective solutionfor meeting those needs. Critical Thinking Questions1. Who else (role, department) and how many people would you select to bea member of the team? How would…
Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent $5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him interest rate 10% annually if alternatively invested. He has been offered $15,000 per year to work as a potter for competitor. Total annual revenue from pottery sales is $72,000. Calculate economic cost for Gomez pottery firm Only type answer and give answer fast