MANAGERIAL ECON.+BUS.STRATEGY (LOOSE)
9th Edition
ISBN: 9781259896422
Author: Baye
Publisher: MCG
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Question
Chapter 6, Problem 6CACQ
To determine
The type of compensation scheme preferred by a manager is to be ascertained.
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Students have asked these similar questions
Fred currently works for a corporate law firm. He is considering opening his own legalpractice, where he expects to earn $200,000 per year once he gets established. To run his ownfirm, he would need an office and a law clerk. He has found the perfect office, which rents for$50,000 per year. A law clerk could be hired for $35,000 per year. If these figures areaccurate, would Fred’s legal practice be profitable?
Consider the following example:
Jordan currently works for a corporate law firm. She is considering opening her own independent legal practice, where she expects to earn
$300,000 per year once she gets established. To run her own firm, she will have to give up her current job with a salary of $165,000 and will incur
the following annual expenses:
Rent
22,490
Salary - Legal Assistant
21,830
Computer Software License
Office Supplies
Internet Subscription
120
800
1,750
Part 1: How much are Jordan's explicit costs?
46990
Part 2: How much is Jordan's accounting profit? 253010
Part 3: How much are Jordan's implicit costs? 165000
Part 4: How much is Jordan's economic profit? Number
Assume Jordan values her leisure time at $80/hour, and starting her own firm would require her to put in 15 more hours than at the corporate firm:
Part 5: What is the change in Jordan's explicit costs? Number
Part 6: What is the change in Jordan's implicit costs? Number
Last year, Jarod left a job that pays $60,000 to run his own bike repair shop. Jarod's shop charges $65 for a repair, and last year the
shop performed 4,000 repalrs, Jarod's production costs for the year included rent, wages, and equipment. Jarod spent $50,000 on
rent and $120,000 on wages for his employees. Jarod keeps whatever profit the shop earns but does not pay himself an official wage
Jarod used $25,000 of his savings to buy a machine for the business. His savings were earning an annual interest rate of 6 percent.
Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in
front of those numbers
a. What is Jarod's annual accounting profit?
$ 88500 O
b-What is Jarod's annual economic profit?
$ 28500O
Chapter 6 Solutions
MANAGERIAL ECON.+BUS.STRATEGY (LOOSE)
Ch. 6 - Prob. 1CACQCh. 6 - Prob. 2CACQCh. 6 - Prob. 3CACQCh. 6 - Prob. 4CACQCh. 6 - Prob. 5CACQCh. 6 - Prob. 6CACQCh. 6 - Prob. 7CACQCh. 6 - Prob. 8CACQCh. 6 - Prob. 9CACQCh. 6 - Prob. 10CACQ
Ch. 6 - Prob. 11PAACh. 6 - DonutVille caters to its retirement population by...Ch. 6 - Prob. 13PAACh. 6 - Prob. 14PAACh. 6 - Prob. 15PAACh. 6 - Prob. 16PAACh. 6 - Prob. 17PAACh. 6 - Prob. 18PAACh. 6 - Prob. 19PAACh. 6 - Prob. 20PAACh. 6 - Prob. 21PAACh. 6 - Prob. 22PAACh. 6 - Prob. 23PAACh. 6 - Prob. 24PAACh. 6 - Prob. 25PAACh. 6 - Prob. 26PAACh. 6 - Prob. 27PAA
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