Simon and Erica give up their jobs in the economics dept to set up their own consulting firm. To set up their business they have to buy an office for $50,000. If they had not bought this office, they would have invested this money they spent on buying the office and earn an annual interest of 10%. They also need to hire a research assistant at a salary of $50,000 per annum. In their first year of business, Simon and Erica expect to earn a revenue of $200,000.

Do you think Simon and Erica are making the right decision about setting up this firm, based on the economic way of thinking? Explain using the concept of marginal benefit and marginal cost of this decision.