Jack quit his job at Canadian Tire where he earned $28,000 a year. He cashed in $30,000 in corporate bonds that earned 10% interest annually to buy a mini-bus. Jack has decided to buy the mini-bus and set up a commuter service between Delta and Vancouver. There are 200 people who will pay $800 a year each for the commuter service; $650 from each person goes for gas, maintenance, insurance, depreciation, etc.
(a) What are Jack's total revenues?
(b) What are Jack's explicit costs?
(c) What is Jack's accounting profit?
(d) List two important implicit costs that Jack has not included.
(e) What is Jack's pure economic profit (loss)? What actions should Jack take based on his pure economic profit (loss)?