Question 1 (CLO 3, Marks 5): At the start of the year, Ashun quit her job and gave up a salary of $175,000 per year to start her own business, Ashuns Media Production. Her new business deals in producing high-quality video commercials for small and large business and provide services on the usage of video contents for the effective advertisement of products. A partial income statement for the first year of operation for Ashuns Media Production is shown below. To get started, Ashun spent $100,000 of her personal savings to pay for some of the equipment used in the media production , and the remaining money is borrowed from the banks on interest payment. In the first year of operation, Ashun could have earned a 15 percent return by investing $ 100,000 in another business with risk levels similar to the risk level at Media Production.

Revenue from sales of product and services	$ 970,000
Cost of Products and service sold	$ 355,000
Selling Expenses	$ 155,000
Administrative Expenses	$ 45,000
Total Expense and Operating Cost	$ 555,000
Operating Income	$415,000
Interest Paid	$45,000
Legal Cost	$ 28,000
Tax Paid	$ 165,000
Net Income	$ 177,000

Required:

a) Using the information presented in the above scenario determine total economic cost associated with Ashuns Media Production Business?

b) Using the Information above and the resulted answer in part (a), determine accounting and economic profit of Ashuns Media Production

c) Given your answer in part (b), do you think by starting her own business and giving up her job, Ashuns made the right decision? Why or Why not?

Question 2 (CLO 3, Marks 5): If a firm is incurring an economic loss, would society be better off if the firm shut down? Would the firm want to shut down?

Question 3 (CLO 4, Mark 5) If a perfectly competitive firm raises its price above the prevailing market rate, how much of its sales might it lose? Why? Can a competitive firm ever raise its prices? If so, when?? Critically Evaluate

Question 4 (CLO 4, Marks 5) Why would anyone want to enter a profitable industry knowing that profits would eventually be eliminated by competition?