Answer to Question #209183 in Microeconomics for CHIM

Question

Upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of RM60,000 annually. Last year you earned a total revenue of RM100,000. Rent and supplies last year were RM50,000. . Based on the above information, describe the condition of your firm. 

Answer 1

The firm made net profits of RM50,000(RM100,000-RM50,000) which has translated in 50% net profit margin. The company has good returns and its promising to give more returns in the future. Compared with the annual income of RM60,000 the opportunity cost lost is RM10,000 which is not much different from his return. With self employment, one enjoys flexibility and gives extra hardwork to his firm.