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Jaynet spends $30,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm – one offer was for $95,000 per year, and the other was for $100,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 25 paintings per year at a price of $8,000 each:

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TomShelby

Answer:

She is right, it is a better option for her to continue with her painting carrer. As is provides better economic profit.

Explanation:

accounting profit:

the sum of the explicit revenues less the explicit cost

25 painting at 8,000 each    200,000

supplies expense                  (30,000)  

             accounting profit       170,000

economic profit:

from the accounting pprofit, it subtract the opportunity cost, which is the cost for the best rejected option.

accounting profit         170,000

opportunity cost        (100,000)  

      economic profit     70,000

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