Suppose Natasha currently makes $80,000 per year working as a manager at a cable

Question

Suppose Natasha currently makes $80,000 per year working as a manager at a cable TV company. She then develops two possible entrepreneurial business opportunities. In one, she will quit her job to start an organic soap company. In the other, she will try to develop an Internet-based competitor to the local cable company. For the soap-making opportunity, she anticipates annual revenue of $465,000 and costs for the necessary land, labor, and capital of $395,000 per year. For the Internet opportunity, she anticipates costs for land, labor, and capital of $3,250,000 per year as compared to revenues of $3,275,000 per year. a. Should she quit her current job to become an entrepreneur? . b. If she does quit her current job, which opportunity would she pursue? .

Explanation / Answer

We have to find economic profit in both senario
Economic profit=TR-Implicit cost-Explicit cost
Economic profit of opportunity 1=465000-395000-80000= -10000
Economic profit of opportunity 2=3250000-3275000-80000=-105000
A)
she should not quit her current job to become an entrepreneur .
b. If she does quit her current job, opportunity 1 would she pursue

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