Economics help! Gomez runs a small pottery firm. He hires one helper?

Question

at $12,000 per year, pays annual rent of $5000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Gomez’s pottery firm.

Answer 1

His yearly expenses are $12K + $5k + $20K = $37,000.
His gross income is $72,000, so his net is $72K - $37K = $35,000. Since he has $40K invested, he's nearly doubling his money every year.

But if he could sell his equipment for $40K (a big maybe) and invest it and get a $4K return from it, and then go to work for his competitor and be paid $15K, then his income would be $19K. His entrepreneurial talents might or might not make him any money in his new job. (The competitor who's made him the offer thinks he is worth $15,000, so presumably that is his estimate of Gomez's total worth, including his entrepreneurial talents.)

So what Gomez has to decide is, would he rather work for himself and make $35K per year, or for the other guy & make $19K. Gee, what do you think? Tough decision?

Gomez should tell that guy to get lost.

Answer 2

the respond is interior the item itself: "concerns approximately vulnerable business enterprise situations, alongside with sales; funds pass" those are constantly the considerable motives companies do not hire. sturdy cases and undesirable. It constructive as hell isn't taxes. Taxes are inevitable. in case you do not have the call for then you do not prefer extra advantageous workers. No call for potential much less sales, much less sales potential much less sales and of path much less funds. some companies are in simple terms piggy banks and poorly run. as an occasion Walmart is doing properly collectively as Kmart is on the ropes. government regulations is bullsh!t. There are not any new regulations and Obama has signed decrease than Bush. ninety 5% small companies have not got any enormous regulations to fret approximately. except you're interior the nutrition marketplace or oil and gas. For the main area. A liquor license is on the sate point and has constantly been there. %. a extra perfect resource than the national evaluation. it particularly is exciting how human beings talk nonstop approximately capitalism yet do not somewhat seem to know it.

Answer 3

He is better off working for himself as he would earn about three times as much money working for self

Answer 4

If he cannot work out the profit, why is he doing business.

Answer 5

$13,000