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Pat, a lawyer working for a large law firm and earning $62,000 per year, is contemplating setting up her own law practice. She estimates that renting an office would cost $11,000 per year; hiring a legal secretary would cost $22,000 per year; renting the required office equipment would cost $13,000 per year; and purchasing the required supplies, and paying for electricity, telephone, and so forth would cost another $5000. The lawyer estimated that her total revenues for the year would be $105,000, and she is indifferent between keeping her present occupation with the large law firm and opening her own office.
a) How much would be the explicit costs of the lawyer for running her own law office for the year?
b) How much would the accounting costs be? The implicit costs? The economic costs?
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