1. Leopold “Butters” Stotch (hereafter referred to as Butters) works as Paris Hilton’s pet bear. He is considering a binary choice today. Starting from now, Butters’ lifetime earnings as a pet bear will be $10,000,000. His lifetime expenses in this job will be $50,000 in dry cleaning of his bear suit, $200,000 in food (because Paris only gives him bear food), and $3,000,000 in costs associated with failed escape attempts. Instead, Butters could become an author; not just any author, but the genius voice of our generation who changes literature as we know it (like Kanye or Pitbull, but for books). His lifetime earnings as an author would be $8,000,000. His expenses for this job would be $20,000 in materials and office equipment, along with $500,000 for a rural home in which to work and live. He would have to borrow the money for those expenses, and he would have to pay back $10,000 in interest. Finally, while he is unemployed and working on his first novel, he could be earning $500,000 working as Paris Hilton’s pet bear.
- What is Butters’ accounting profit of being Paris Hilton’s pet bear (show your work)?
- What is Butters’ accounting profit of becoming an author (show your work)?
- What is Butters’ economic profit of being Paris Hilton’s pet bear (show your work)?
- What is Butters’ economic profit of becoming an author (show your work)?
- Butters must make a binary choice. Should he be Paris Hilton’s pet bear, or should he become an author? Why should he make that choice?