Suppose Winston's annual salary as an accountant is $60,000, and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. To run the business, he outlays $8,000 in cash to cover all the costs involved with running the business, and earns revenues of $150,000. What costs would be considered when calculating economic profit?

A. The opportunity cost of his job and interest forgone of $64,000, and the explicit cost of $8,000
B. The implicit cost of the interest forgone of $4,000 and the explicit cost of $8,000
C. The explicit cost of $8,000
D. The implicit cost of his job of $60,000 and the opportunity cost of forgone interest of $4,000


A. The opportunity cost of his job and interest forgone of $64,000, and the explicit cost of $8,000

Economics

You might also like to view...

Given the demand curve in Figure 5-24, explain how consumer’s surplus is calculated.

What will be an ideal response?

Economics

Which of the following policies have been suggested as ways to boost the growth of productivity?

A) tax cuts to boost saving and investment B) reducing the budget deficit by raising taxes and cutting expenditures C) increasing public investment in education D) redesigning and scaling back the regulatory apparatus of the federal government E) all of the above

Economics

Refer to the above figure. Point B is known as

A) a peak. B) a recession. C) an expansion. D) a contraction.

Economics

One reason many people make their own pickles rather than buy them is that

a. they can maintain control over the quality during production b. the total cost of ingredients is the same as the price of store-bought pickles c. firms do not make high-quality pickles d. people place a high value on their time e. firms do not produce goods that can be made at home

Economics