1. Winston and Julia are considering quitting their jobs and starting their own business. Their combined salaries are $140,000 per year. They will cash out a $30,000 investment that earns 10% per year to help fund the business. They own a small office bldg. that they are renting out for $12,000 a year. They will end the rental contract and use the building for their business. They estimate variable costs (labor, supplies, energy, etc) will be $120,000 per year. They expect revenue of $250,000 per year.

1. Calculate accounting costs and accounting profit of starting their own business.

1. Calculate economic costs and economic profit of starting their own business.

1. What should they do?

d. If they value being their own boss at $40,000 per year (“physic income”) would your answer to part c change?