Question

Can you please give a step by step for this as well? I am very confused on the topic.

1. A currently employed woman, working for $40,000 per year is considering opening her own business. She estimates that renting a space will cost her $30,000 per year; hiring a part-time employee will cost her $20,000 per year; purchasing equipment will cost $70,000; and other out-of-pocket expenses will come to $30,000. She estimates that her total revenues will be $170,000 per year.

a. How much would be the explicit costs of her business be?

b. How much would the accounting profits be?

c. The implicit costs?

d. Should she open own business? Why? (10 points)

2. Complete the following table

Q            TFC                       TVC           TC                      AFC                       AVC                       ATC                       MC

0                                                             4000                  ----                        ----                        ----                        ----

1                                              1270                                                                                                                                         

2                                                                                                                      1260                                                                 

3                                                                                                                                                    2610                                   

4                                                                                                                                                                                  1350     

5                                                          10,590                                                                                                                          

Answer 1

a) Explicit cost is $ 150,000

b) Accounting profit $20,000

c) Implicit cost $40,000

d) No the woman should not start a business as it will give a negative economic profit of $20,000