Question

Jen runs a martial arts club. She now has 50 trainees who pay monthly dues of $200. Every month she pays $1,000 in miscellaneous club- related expenditures including utilities, accounting services, etc. To run the club she quit her day job where she used to earn $7,000/month She decided to pay herself the same salary for her time spent at the club. She runs the club from the first floor of her house that she inherited from her mother (a famous.martial arts teacher herself). There are no payments associated with using that space. Although she could have leased the space to another business for $3,000/month. Using this information answer the following questions: . Her monthly economic cost is $ • Her monthly accounting cost is $ . Her monthly economic profit is $ • Her monthly accounting profit is $ 2000 Check

Answer 1

Economic cost = Accounting cost + Opportunity cost

Her monthly economic cost is $11000[ 7000+1000+3000]

Accounting cost = Explicit cost

Her monthly accounting cost = $8000[ 7000+1000]

Economic Profit = Total Revenue - Economic Cost

Her monthly economic profit is -$1000[ 10,000-11000]

Accounting profit = Total Revenue - Accounting cost

Her monthly accounting profit is $2000[ 10,000-2000]