Last year, Jarod left a job that pays $50,000 to run his own bike-repair shop. Jarod's shop charges $65 for a repair, and last year the shop performed 3,000 repairs. Jarod's production costs for the year included rent, wages, and equipment. Jarod spent $40,000 on rent and $100,000 on wages for his employees. Jarod keeps whatever profit the shop earns, but does not pay himself an official wage. Jarod borrowed $20,000 for the shop's equipment at an annual interest rate of 5 percent. Instructions: Round your answers to the nearest dollar and include a negative sign if appropriate. a. What is Jarod's accounting profit? b. What is Jarod's economic profit?

Last year, Jarod left a job that pays $50,000 to run his own bike-repair shop. Jarod's shop charges $65 for a repair, and last year the shop performed 3,000 repairs. Jarod's production costs for the year included rent, wages, and equipment. Jarod spent $40,000 on rent and $100,000 on wages for his employees. Jarod keeps whatever profit the shop earns, but does not pay himself an official wage. Jarod borrowed $20,000 for the shop's equipment at an annual interest rate of 5 percent. Instructions: Round your answers to the nearest dollar and include a negative sign if appropriate. a. What is Jarod's accounting profit? b. What is Jarod's economic profit?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 4.5IP

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Blake decides to spend a spring day in the field planting wheat with some help from some workers he hires. Blake earns total revenue of $870. Blake incurs the following costs: $50 for renting a tractor, $150 for fertilizer, and $100 for wages paid to workers. Blake used $5000 that he could have invested in his savings account at 10 percent interest to organize his spring day planting wheat. In addition, Blake gave up $130 he could have earned at his other job in deciding to plant wheat. Refer to Scenario 13-1. What is Blake’s economic profit? a. –$130 b. –$60 c. $130 d. $470
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