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A company owns an empty office building and is deciding how to use it next year. It would cost $100,000 to staff the office and $15,000 for equipment. The revenues would be $160,000. Meanwhile, it could rent the office to another company for $75,000 in revenues. In both cases, the company must pay $5,000 for the building's electricity.
Required:
a) If the company is seeking to maximize its economic profit, which course should it pursue and what is the outcome?

Respuesta :

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Answer:

It is more profitable to rent the office. Income will increase by $30,000

Explanation:

Giving the following information:

It would cost $100,000 to staff the office and $15,000 for equipment. The revenues would be $160,000.

Rent= $75,000 in revenues.

We need to calculate the most profitable decision:

Option A:

Income= 160,000 - 100,000 - 15,000= 45,000

Option B:

Rent= 75,000

It is more profitable to rent the office.

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