Imagine Tom's annual salary as an assistant store manager is $30,000, he owns a building that rents for $10,000 yearly, and his financial assets generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. Has Tom made the best decision?

A. No, because he's earning an economic profit of -$6,000.
B. Yes, because he's earning an accounting profit of $35,000.
C. No, because his accounting profit is larger than his economic profit.
D. Yes, because his accounting profit is larger than his economic profit.


Answer: A

Economics

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