Barney decides to quit his job as a corporate accountant, which pays $14,000 a month, and...
Barney decides to quit his job as a corporate accountant, which pays $14,000 a month, and goes into business for himself as a certified public accountant.
He runs his business from his converted garage apartment, which he could rent out for $320 a month if he wasn’t using it as a home office. He must purchase office supplies worth $70 a month, and his monthly electricity bill has increased by $50 now that he is working out of his home office.
After six months of working from home, Barney has earned an average of $16,000 per month.
Instructions: Enter your answers as a whole number.
a. What are Barney’s average monthly accounting profits?
$
b. What are Barney’s average monthly economic profits?
$
Homework Answers
a) Average monthly accounting profits
= TR-TC
= (16000-120) = 15880
b) Average monthly economic profits
= TR-TC-(Opportunity costs)
= 15880-(14000+320)
= 1560
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