Mrs E C Mist runs a bookshop. In the last year her accountant calculated Mrs Mist's...

 

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Mrs E C Mist runs a bookshop. In the last year her accountant calculated Mrs Mist's profit by comparing her revenue with her expenditure on staff wages, depreciation, overdraft interest, rent, and the cost of the books sold. The resulting figure was $60,000 which her accountant calls "profit". Her accountant congratulates Mrs Mist on running such a profitable business. However, Mrs Mist sees things slightly differently. She estimates that: she could have earned $58,000 as a pensions actuary if she had not been running the bookshop ● (i) (ii) (iii) (iv) the $30,000 of her own money that she put into the business would have earned $2,500 in interest if she had left it in her bank account. (Arguably, we should really consider the investment return that would have been earned on an investment with a similar level of risk to the book shop.) Which costs are (a) explicit and (b) implicit? What is Mrs Mist's normal profit? What economic profit did Mrs Mist make last year? Assuming she can sell the bookshop business for $30,000, what does your answer suggest Mrs Mist should do next year? In the next year, Mrs Mist again runs the bookshop and her accountant calculates the accounting profits as being $80,000. (v) Assuming that her actuarial salary would have been $63,000 and her initial $30,000 investment in the business would have earned $2,800. How will Mrs Mist view this? Find the value of 4601- Question 1.23 If 401,000 and 140+1=140-5t for t=1,2,...,10, calculate the value of 6% pa interest. [3] 440-10 at [3] Mrs E C Mist runs a bookshop. In the last year her accountant calculated Mrs Mist's profit by comparing her revenue with her expenditure on staff wages, depreciation, overdraft interest, rent, and the cost of the books sold. The resulting figure was $60,000 which her accountant calls "profit". Her accountant congratulates Mrs Mist on running such a profitable business. However, Mrs Mist sees things slightly differently. She estimates that: she could have earned $58,000 as a pensions actuary if she had not been running the bookshop ● (i) (ii) (iii) (iv) the $30,000 of her own money that she put into the business would have earned $2,500 in interest if she had left it in her bank account. (Arguably, we should really consider the investment return that would have been earned on an investment with a similar level of risk to the book shop.) Which costs are (a) explicit and (b) implicit? What is Mrs Mist's normal profit? What economic profit did Mrs Mist make last year? Assuming she can sell the bookshop business for $30,000, what does your answer suggest Mrs Mist should do next year? In the next year, Mrs Mist again runs the bookshop and her accountant calculates the accounting profits as being $80,000. (v) Assuming that her actuarial salary would have been $63,000 and her initial $30,000 investment in the business would have earned $2,800. How will Mrs Mist view this? Find the value of 4601- Question 1.23 If 401,000 and 140+1=140-5t for t=1,2,...,10, calculate the value of 6% pa interest. [3] 440-10 at [3]

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The images contain different sets of questions related to economics and actuarial science We will address each question from the first image in turn focusing on the economics of Mrs E C Mists bookshop ... View the full answer