23.4k views
1 vote
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?

1 Answer

4 votes

Answer:

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

Step-by-step 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.

User JJohnson
by
8.2k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.