Mary leaves her job as network administrator to start her ow

Mary leaves her job as network administrator to start her own consulting business. In her old job, she was paid $80,000 per year. In her first year, her consulting business had revenue of $100,000 with just $30,000 in expenses. 1. What is the total accounting cost for the consulting firm’s first year? 2. What is the total accounting profit or loss for the consulting firm’s first year? 3. What is the firm’s total explicit cost? 4. What is the firm’s total implicit cost?

Solution

1. $30,000

2. Accounting Profit: $100,000 - $30,000 = $70,000

3. $30,000

4. Opportunity cost of Mary’s Time: $80,000