Question

# Florence is considering establishing a business and has developed the following estimates of monthly costs and

revenues to aid her in her decision-making process. She has decided to house the business in a building that she already owns, ahough she could rent the building to someone else for \$1,000 per month. Estimated payments for utilities (electricity, natural gas, water, and telephone) are \$475 per month. She will hire one employee at a total cost of \$1,100 per month. Inventory is estimated to cost \$2,800 per month. Finally, Florence earns \$3,000 a month in her current job.

a. How much monthly revenue would Florence have to take in to earn 0 economic profit?

b. Assume that Florence has estimated her monthly revenue to be \$9,000. In this case, Florence would earn an accounting profit (loss) of ________, and an economic profit (loss) of ________.

c. Assume instead that Florence does not own a building, and that she will have to rent a building for \$1,000 per month (all other estimates remain the same). In this case, assuming an estimated monthly revenue of \$9,000, Florence would earn an accounting profit (loss) of ________, and an economic profit (loss) of ________.

Microeconomics