Ted Mosby is considering leaving his job at a prestigious ar…
Ted Mosby is considering leaving his job at a prestigious architecture firm, where he earns an annual salary of $80,000, to start his own independent architecture practice. To get started, Ted can withdraw $20,000 from his savings account (which earns 5% annual interest) to rent an office space and purchase equipment. In his first year of running his own business, Ted can earn $100,000 in revenue but incur $30,000 in explicit costs (for rent, office supplies, and marketing). Ted’s accounting profit is _______, and his economic profit is _______. Based on this information, should Ted keep his job at the prestigious firm, or should be start his own business?
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