Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sarah can quit her job at Economics R Us where she earns $100,000 a year. Sarah can buy a bus and set up a commuter

Sarah can quit her job at Economics R Us where she earns $100,000 a year. Sarah can buy a bus and set up a commuter service between Los Angeles and San Diego. 10,000 customers will pay $250.00 a year each for the commuter service. Sarah estimates $175 (a year) for each customer will go towards accounting costs that include gas, maintenance, insurance, and depreciation. Also, Sarah estimates that her entrepreneurial skills can yield a normal profit of $15,000 in a part-time business venture selling Avon products. Sarah can sell Avon products while keeping her full time Economics R Us job. Sarah is unable to operate the commuter business while also keeping her job at Economics R Us or selling Avon products part-time. Show all work and calculations. (10 points).

(a) (1) If Sarah starts the commuter service business, what are Sarah's total revenues? (2) What are Sarah explicit costs? (3) What is her accounting profit? (3 point)

(b) What are Sarah's implicit costs she should consider when evaluating her decision on what to do? (2 point)

(c) What is Sarah's economic profit (loss) after considering both implicit and explicit costs? What should Sarah do? (5 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

French Banking And Entrepreneurialism In China And Hong Kong From The 1850s To 1980s

Authors: Hubert Bonin

1st Edition

0429560095, 9780429560095

More Books

Students also viewed these Economics questions

Question

6. How can hidden knowledge guide our actions?

Answered: 1 week ago

Question

7. How can the models we use have a detrimental effect on others?

Answered: 1 week ago