Sally quit her job as an auto mechanic earning $50 000 per year to start her own business.To save money, she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10 000 per year.She also invested her $20 000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations. a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?
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Question

Sally quit her job as an auto mechanic earning $50 000 per year to start her own business.To save money, she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10 000 per year.She also invested her $20 000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.  a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?
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Quizplus · Accepted Answer

The Answer of Sally quit her job as an auto mechanic earning $50 000 per year to start her own business.To save money, she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10 000 per year.She also invested her $20 000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations.  a.Calculate her economic costs.
b.Calculate her accounting costs.
c.Calculate her implicit costs.
d.Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?
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Sally Quit Her Job as an Auto Mechanic Earning $50