Joe Smart gets sick and tired of his job at Microsoft (which by the way was paying him $100,000 a year). He decides to come to Ripon and open a car repair shop. he takes $20,000 from his savings that were earing 10% interest a year and uses this money to rent a garage and purchase the equipment. By the end of the year it appears that his expenses on labor were $50,000, utilities $10,000, and supplies $30,000. The total revenue of his business was $200,000.

What are the accounting explicit costs of joe's business? What are the implicit economic costs of this business?

Question

Joe Smart gets sick and tired of his job at Microsoft (which by the way was paying him $100,000 a year). He decides to come to Ripon and open a car repair shop. he takes $20,000 from his savings that were earing 10% interest a year and uses this money to rent a garage and purchase the equipment. By the end of the year it appears that his expenses on labor were $50,000, utilities $10,000, and supplies $30,000. The total revenue of his business was $200,000.

What are the accounting explicit costs of joe's business? What are the implicit economic costs of this business?

anonymous · Answer

Also what is the accounting profit, if any? What is the economic profit, if any?

And would you advise Joe to exit the business or to stay in business? Elaborate on the conditions under which he should stay or exit.