6j46uj

.pdf
School
Finlandia University **We aren't endorsed by this school
Course
HIST 221
Subject
Economics
Date
Nov 2, 2023
Pages
1
Uploaded by BrigadierFlamingo3723 on coursehero.com
Question Answer Answers i) Accounting costs are explicit costs or out of pocket cost of doing a business. If you're considering opening your own consulting firm, the explicit costs you'll incur are hiring a law clerk and paying rent for the office. Therefore, accounting costs = RM 50,000 + RM 35,000 = RM 85,000 ii) Opportunity cost of doing a business is what you have to give up in order to do that business. If you're considering opening your own consulting firm, you have to give up your current job. Therefore, opportunity cost = RM 125,000 iii) Once you get established, you'll earn a total revenue of RM 200,000 per year. The total cost of doing your business = RM 85,000 + RM 125,000 = RM 210,000. As Total cost exceeds total revenue, you'll make loss. Therefore, this consulting firm won't be profitable. iv) Economic profit = Total Revenue - Total cost Where, Total cost = Accounting costs + opportunity cost Therefore, in order to make positive economic profit, you'll have to make more than RM 210,000 in revenue per year.
Page1of 1
Uploaded by BrigadierFlamingo3723 on coursehero.com