8 (Eco. Costs) 05/01/18 05 Question (2 points) n Sachs paid Heather $100000.00 p

Question

8 (Eco. Costs) 05/01/18 05 Question (2 points) n Sachs paid Heather $100000.00 per vear, she was not satisfied with her job. She had loved going white-water rafting and skling families on different white-water trips, and in the winter, she leads clients on skiling trips. Tostart her business. Hesther borrowed $100,000 from a bank and used $70 000 of her savings Her sev nes earned 10% interest. At the end of the year. She wanted to know whether her new business enture was worthwhile. The table below lists her total revenue and itemized costs for Family Adventures 5.000.00 Part 1 (1 point) ? See Hint Part 2 (1 point) It the economic profit is less than zero, be sure to include the- sign) k 057 >

Explanation / Answer

Accounting profits: Revenues 200,000 Less: Actual cost incurred Employees wages 120,000 Rent on her builldingoffice 25000 Payment on bank loan 10000 Utility expense 5000 Accounting profits: 40,000 Note: payment on bank loan is assumed to be interest only in the absencec of information.' Economic Profits: Accounting profits 40,000 Less: Opportunity (Implicit cost) Salary from Goldman Sachs 100,000 Interest on saving (70000*10%) 7000 Economic Profits: -67,000

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