You own and operate a car engine rebuilding business. In 2010, you earned total

Question

You own and operate a car engine rebuilding business. In 2010, you earned total revenue of $180,000. Your direct cost of operating the business was $120,000 but to start the business you gave up your day time job that paid you $80,000 that year Exhibit 0140 a. What was your economic cost in 2010 S O IMC S30 24 20 ATC AVC b. What was your normal profit in 2010 10 What was your accounting profit in 2010 1R c. D 50c50 200 Answer the following questions based on the graph above; a. What is profit-maximizing or loss-minimizing monopolist's total cost? d. What would your economic profit be in 2010 b. What is his fixed cost?

Explanation / Answer

Q4

Answer
a)
Economics cost is total cost
=implicit cost+explicit cost
implicit cost=salary of job gave up for business
=$80000
Explicit cost=direct cost or accounting cost
=120000
Economic cost=120000+80000=200000
b)

Normal profit=revenue-explicit cost-implicit cost=180000-80000-120000=-20000

c)
accounting profit=Total revenue-explicit cost=180000-120000=60000

d)
Normal profit is negative so it is economic loss of $20000

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