1.Chapter 8Calculating Accounting and Economic Profit (Implicit versus Explicit Costs)

Jackie owns and operates a website design business. To keep up with new technology, she spends $5,000 per year upgrading her computer equipment. She runs the business out of a room in her home. If she didn't use the room as her business office, she could rent it out for $2,000 per year. Jackie knows that if she didn't run her own business, she could return to her previous job at a large software company that would pay her a salary of $60,000 per year. Jackie has no other expenses.

a.How much total revenue does Jackie need to make in order to break even in the eyes of her accountant? That is, how much total revenue would give Jackie an accounting profit of just zero?

b.How much total revenue does Jackie need to make in order for her to want to remain self-employed? That is, how much total revenue would give Jackie an economic profit of just zero?

2.Chapter 8Study Problem 2: Law of Diminishing Product/Returns

The following table shows a short-run production function for laptop computers.Use the data to determine where diminishing product begins.

Number of Total Output of Marginal Workers Laptop Computers Product 40 2 100 150 180 200 205 7 200 190