Question

Cinthya quit her job, at which she was earning $60,000 per year, in order to start a new business. She took $50,000 out of savings, for which she was earning 10% interest annually, and used it to buy inventory for her new business. She also paid $12,000 in rent on the building and $20,000 in additional labor costs. In her first year of operations, Cinthya received $150,000 in revenue from sales. Cinthya's explicit costs associated with her business in its first year totaled $ . Her implicit costs totaled $ . Cinthya's accounting profit was $ . Her economic profit was $ . Based on your calculation above, what advice would you give Cinthya about her business (should she stay in operation or close down)? What does her economic profit mean about her current use of resources for her business?

          Cinthya quit her job, at which she was earning $60,000 per year, in order to start a new business. She took $50,000 out of savings, for which she was earning 10% interest annually, and used it to buy inventory for her new business. She also paid $12,000 in rent on the building and $20,000 in additional labor costs. In her first year of operations, Cinthya received $150,000 in revenue from sales.

Cinthya's explicit costs associated with her business in its first year totaled $
 .

Her implicit costs totaled $
 .

Cinthya's accounting profit was $
 .

Her economic profit was $
 .
 
Based on your calculation above, what advice would you give Cinthya about her business (should she stay in operation or close down)? What does her economic profit mean about her current use of resources for her business?

Added by Tidalis M.

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