A risk premium
A) is required to get a risk-neutral person to make a fair bet.
B) is the maximum amount needed to compensate a decision-maker to willingly take a risk.
C) is the maximum amount a decision-maker would pay to avoid taking a risk.
D) is the minimum amount a decision-maker would pay to avoid taking a risk.
C
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A) economic profits are possible over the long run. B) economic profits are possible but only over limited amounts of time. C) economic profits are not possible. D) the cost of capital will not be covered.
The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's accounting profit is: A. $150,000. B. $380,000. C. $230,000. D. $294,000.