Question
Suppose you are earning $22,000 a year working as a sales representative for a T-shirt manufacturer. At some point you decide to open a retail
Suppose you are earning $22,000 a year working as a sales representative for a T-shirt manufacturer. At some point you decide to open a retail store of your own to sell T-shirts. You invest $20,000 of savings that has been earning an interest income of $1000 per year. You decide that your new firm will occupy a small store that you currently own and have been renting out for $5000 per year.
A year after you open the store you total up your accounts and find the following:
Total sales revenue............................................................$120,000
Cost of T-shirts...................................$40,000
Clerk's salary.....................................18,000
Utilities (bills from hydro, internet, etc.).........5,000
a.What are the total explicit costs?
b.What are the total implicit costs?
c.According to an Accountant, what is your annual profit?
d.What is your annual economic profit?
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