Your uncle is thinking about opening a wine bar. He estimates that it would cost $400000 per year to rent the location and buy the stock. In addition he would have to quit his $120000 per year job as an accountant. Suppose your uncle thought he could sel S600000 worth of wine in a year. Which statement is true? His economic profit is $80000 which is less than he earns as an accountant so he should not open the wine bar Total cost of running the wine bar is $400000 and he should open the store since his economic profits would be $180000. Total cost of running the wine bar is 5520000 and he should open the bar since his economic profits will be positive. His accounting profits are 580000 which is stil enough to make it worch opening the wine bar
Your uncle is thinking about opening a wine bar. He estimates that it would cost $400000 per year to rent the location and buy the stock. In addition he would have to quit his $120000 per year job as an accountant. Suppose your uncle thought he could sel S600000 worth of wine in a year. Which statement is true? His economic profit is $80000 which is less than he earns as an accountant so he should not open the wine bar Total cost of running the wine bar is $400000 and he should open the store since his economic profits would be $180000. Total cost of running the wine bar is 5520000 and he should open the bar since his economic profits will be positive. His accounting profits are 580000 which is stil enough to make it worch opening the wine bar
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
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.6IP
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