Question

Maureen left her teaching job, which paid $30,000 per year, and invested $20,000 of her retirement fund (which was earning 10 percent interest) in a new real estate business. Her accountant predicted a $60,000 revenue the first year. Her husband, an economist, forecast her profit to be:_____________________________.
a.$60,000.
b.$10,000.
c.$28,000.
d.$32,000.

Answer 1

Answer:

total economic profit  = $28,000

so correct option is c.$28,000

Explanation:

given data

paid = $30,000 per year

invested = $20,000

earning interest =  10 percent

revenue 1st year = $60,000

to find out

forecast her profit to be

solution

we know that economic profit is express as difference between the total revenue and total cost ...............1

so total economic profit = revenue - paid - Interest earned on retirement   ....................2

as here it include both implicit and explicit cost of production of goods

and Implicit cost is the opportunity cost

so total economic profit = $60,000 - $30,000 - 10% of 20,000

total economic profit  = $28,000

so correct option is c.$28,000