A Potential Entrepreneur Is Trying to Decide Whether to Open

question 90

Essay

A potential entrepreneur is trying to decide whether to open a new health spa.She currently makes $35,000 per year as an aerobics instructor and will have to give up this job if she opens the new health spa.If she chooses to open the spa,it will cost her $200,000 per year in rent and other operating expenses.
a.What are her accounting costs?
b.What are her opportunity costs?
c.How much would she need to make in revenues to earn positive accounting profits?
Positive economic profits?

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Definitions:

Buyer Information

The details and data about consumers that are relevant for businesses in understanding their needs, preferences, and behavior.

Moral Hazard

A situation where one party is more likely to take risks because another party bears the consequences of those risks.

Alter Behavior

The process of changing or modifying actions, habits, or conduct.

Production Subsidies

Financial support given by the government to producers or manufacturers to help reduce the cost of producing goods or services.