Question
Jane quit her job at IBM where she earned $50,000 a year. She cashed in $50,000 in corporate bonds that earned 10% interest annually to
Jane quit her job at IBM where she earned $50,000 a year. She cashed in $50,000 in corporate bonds that earned 10% interest annually to buy a mini-bus. Jane has decided to buy the mini-bus and set up a commuter service between Lincoln and Omaha, Nebraska (USA). There are 1000 people who will pay $400 a year each for the commuter service; $280 from each person goes for gas, maintenance, insurance, and depreciation. She estimates that her entrepreneurial skills would have typically yielded a normal profit of $5,000 in another business.
(a) Complete the following questions:
(i) What are Jane's total revenues?
(ii) What are Jane's explicit costs?
(iii) What is her accounting profit?
(b) List the three important implicit costs that Jane has not included (both the monetary amount and a description).
(c) What is Jane's pure economic profit (or loss)?
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