Answer to Question #293495 in Microeconomics for Ann

Question

Suppose Natasha currently makes ​$57,000 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 ​$483,000 and costs for the necessary​ land, labor, and capital of ​$434,000 per year. For the Internet​ opportunity, she anticipates costs for​ land, labor, and capital of ​$3,204,000 per year as compared to revenues of ​$3,273,000 per year.

a. What would she make in profits if she opens her organic soap​ company? ​$

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b. What would she make in profits if she opens her Internet​ business? ​$

enter your response here

Answer 1

Solution:

a.). Profit (organic soap company) = Total revenues – Total costs = 483,000 – 434,000 = $49,000

 

b.). Profit (Internet business) = Total revenues – Total costs = 3,273,000 – 3,204,000 = $69,000