Last year, Jarod left a job that pays $60,000 to run his own bike-repair shop. Jarods shop

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Last year, Jarod left a job that pays $60,000 to run his own bike-repair shop. Jarod’s shop charges $65 for a repair, and last year the shop performed 3,000 repairs. Jarod’s production costs for the year included rent, wages, and equipment. Jarod spent $50,000 on rent and $100,000 on wages for his employees. Jarod keeps whatever profit the shop earns, but does not pay himself an official wage. Jarod borrowed $20,000 for the shop’s equipment at an annual interest rate of 5 percent.
a. What is Jarod’s accounting profit?
b. What is Jarod’s economic profit?
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Microeconomics

ISBN: 978-1259163531

1st edition

Authors: Dean Karlan, Jonathan Morduch

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