Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients
He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. What is Angelo's economic profit? A) $28,400
B) $350,000
C) $58,400
D) $268,400
A
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To approximate net annual cash flow, depreciation is
A. Added back to net income because it is an inflow of cash B. Subtracted from net income because it is an expense C. Subtracted from net income because it is an outflow of cash D. Added back to net income because it is not an outflow of cash
What is one reason perfectly competitive firms wish to be ever more efficient?
A) Individual firms are awarded by the tax code to be more efficient. B) Individual firms can better control their costs than the price they can charge. C) Individual firms can better control their costs than their output levels. D) Individual firms don't need to be efficient; government policies do not reward efficiency.