Until recently, you worked for a software development firm at a yearly salary of $35,000. Now, you decide to open your own business. You quit your job, cash in a $10,000 savings account (which pays 5 percent interest), and use the money to buy computer hardware to use in your business. You also convert a basement apartment in your house, which you have been renting for $250 a month, into a workspace for your new software firm. You lease some office equipment for $3,600 a year and hire two part-time programmers, whose combined salary is $25,000 a year. You also figure it costs around $50 a month to provide heat and light for your new office.

a. What are the total annual explicit costs of your new business?

b. What are the total annual implicit costs?

c. At the end of your first year, your accountant cheerily informs you that your total sales for the year amounted to $55,000. She congratulates you on a profitable year. Are her congratulations warranted? Why or why not?