Question

Question 9 (1 point) Jane decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business she turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jane's economic profit from running her own business?

Answer 1

Answer:

The answer is: a) $ 20,000; b) $ 10,000; c) $ 5,000.

Explanation:

Jane's economic benefit in relation to what she won and the other three jobs is as follows: the difference between what was actually earned, and what she could have earned in the other jobs, and according to each of them the differences would be: a) $ 50,000 - $ 30,000 = $ 20,000; b) $ 50,000 - $ 40,000 = $ 10,000; c) $ 50,000 - $ 45,000 = $ 5,000.

The answer is: a) $ 20,000; b) $ 10,000; c) $ 5,000.

Answer 2

Answer: $-65,000

Explanation: Economic profit is the difference between accounting profit and the sum of all opportunity costs.

When Jane decided to open her business, she turned down three jobs, therefore , her opportunity cost is the sum of all the income of the three jobs she didn't take which is equal to $115,000.

Economic profit = $50,000 - $115,000 = $-65,000.

I hope my answer helps.