Answer to Question #3772 in Microeconomics for ashrita

Question

Samantha Jones has a job as a pharmacist earning $30,000 per year, and she is deciding
whether to take another job as the manager of another pharmacy for $40,000 per year or
to purchase a pharmacy that generates a revenue of $200,000 per year. To purchase the
pharmacy, Samantha would have to use her $20,000 savings and borrow another $80,000
at an interest rate of 10 percent per year. The pharmacy that Samantha is contemplating
purchasing has additional expenses of $80,000 for supplies, $40,000 for hired help,
$10,000 for rent, and $5,000 for utilities. Assume that income and business taxes are zero
and that the repayment of the principal of the loan does not start before three years.
(a) What would be the business and economic profit if Samantha purchased the
pharmacy? Should Samantha purchase the pharmacy?(b) Suppose that Samantha expects that another pharmacy will open nearby at the end of three years and that this will drive the economic profit of the pharmacy to zero.What would the revenue?