Calculating Costs and Profits for Jamie's New Company

a. If Jamie decides to embark on her new venture, what will her accounting costs be during the first year of operation? Her implicit costs? Her opportunity costs?

a. Accounting costs: $

Implicit costs: $

Opportunity costs: $

a. Answer:

Let's break down the costs for Jamie's new company:

Accounting costs refer to the actual out-of-pocket costs incurred in running the business. In this case, Jamie's accounting costs for the first year of operation would be $145,000, which includes annual overhead costs and operating expenses.

Implicit costs, on the other hand, are the opportunity costs of using resources for a particular purpose instead of the next best alternative. In Jamie's case, her implicit costs would be the salary she gives up from her current job, which is $75,000 per year.

Opportunity costs are the total cost of pursuing a certain course of action, including both explicit and implicit costs. In Jamie's scenario, her opportunity costs would amount to $220,000, which is the sum of her accounting costs and implicit costs.

When Jamie considers starting her new company, she needs to take into account not only the explicit expenses but also the implicit and opportunity costs involved. By calculating these costs accurately, she can make informed decisions regarding the viability of her venture.

It's essential to carefully assess all costs and potential profits to ensure the success of the new company in the competitive market.