Suppose that you open your own business and earn an accounting profit of $35,000 per year. When you started your business, you left a job that paid you a $30,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your
business. If the normal rate of return on capital is 10 percent, your economic profit is
A) $5,000.
B) -$5,000.
C) $2,000.
D) -$2,000.
Answer: D
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If the technology for producing a good enables one firm to meet the entire market demand at a lower average total cost than two or more firms could, then that firm has
A) patented the market. B) a natural monopoly. C) increasing average total costs. D) a legal barrier to entry. E) a discriminatory monopoly.
Which of these situations is most likely to cause the Fed to introduce a tight money supply?
(A) A recession has reduced aggregate demand and increased unemployment. (B) The economy is expanding quickly and inflation is a concern. (C) The economy is prosperous with relatively low inflation and low unemployment. (D) The federal government passes a new budget with a large deficit.