Managerial Economics Question

posted by .

1)The Midnight hour, a local
nightclub, earned $100,000 in
accounting profit last year. This
year the owner, who had invested $ 1
million in the club, decided to
close the club. What can you say
about economic profit (and the rate
of return)in the nightclub business?
ANSWER:
Economic Profit = TR(total revenue)-
TC(total economic cost)
EP = $100,000 - $1,000,000
EP = -$900,000

Since EP is a negative number the
firm should shut down, the output is
not positive, therefore the company
operates at a loss, the manager
needs to determine how long they
want to continue with this loss
process.
Does this sound like the correct
answer?

Thanks,
EY

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. MIcroeconomics

    Hi. THis is due Tuesday. I am working on it but can use some help. Peggy-Sue has been offered a job by Cookie monster inc for a salary of $125,000 per year. Currently she is producing her own cookies and she has revenues of $260,000 …
  2. Managerial econ 1

    1)The Midnight hour, a local nightclub, earned $100,000 in accounting profit last year. This year the owner, who had invested $ 1 million in the club, decided to close the club. What can you say about economic profit (and the rate …
  3. Economics

    Hi, Could you please help me with the following question?
  4. economics

    I tried answering b, but stuck with a. Can someone please take a look at this and help me out?
  5. managerial economics

    The MidNight Hour, LOCl nightclub, earned $100,000 in accounting profit last year. this year the owner, who had invested $1 million in the club, decided to close the club. What can you say about economic profit (and the rate of return) …
  6. Managerial Economics

    The Midnight hour a local nightclub earned $100,000 in accounting profit last year. This year the owner, who had invested $1million in the club, decided to close the club. What can you say about economic profit (and the rate of return) …
  7. Economics

    During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expense, raw materials, rent, and utilities. The firm's owner has provided $750,000 of her own money instead of investing the money and earning …
  8. economics

    The Midnight Hours, a local nightclub earned 100,000 in accounting profits last year, this year the owner, who had invested 1,000,000 in the club, decide to close the club. What can you say about the economic profit (and the rate of …
  9. economics

    The MidNight Hour, a local nightclub, earned $100,000 in accounting profit last year. This year the owner, who had invested $1 million in the club, decided to close the club. What can you say about economic profit (and the rate of …
  10. Economics

    Suppose that a tour bus business incurred implicit costs of $600,000 and explicit costs of $7 million in a specific year. If the firm sold 125,000 tours at $60 per person, its accounting: A) profits were $100,000 and its economic profits …

More Similar Questions