Question
Jamie is considering leaving his current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market
- Jamie is considering leaving his current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000.
A. If Jamie decides to embark on her new venture, what will her accounting costs be during the first year of operation? (1 point) Her implicit costs? (1 point) Her opportunity costs? (1 point) Please provide the reasoning behind your answers. (2 points)
C. Calculate the economic profits and accounting profits for Jamie. (2 points) Please write down the formulae and show full calculation work to get the full marks. (1 point)
B. Suppose that Jamie's estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? (0.5 points) Positive economic profits? (0.5 points) Please provide the justification or reasoning behind your answer.(1 point)
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