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34kurt
3 years ago
11

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. minus​$5,000.

B. minus​$2,000.

C. ​$5,000.

D. ​$2,000.
Business
1 answer:
Aleonysh [2.5K]3 years ago
7 0

Answer:

B. minus​$2,000.

Explanation:

The computation of the economic profit is shown below:

As we know that

Economic profit = Total revenue - Explicit costs - Implicit costs

= $35,000 - $30,000 - $7,000

= -$2,000

The implicit cost is come from

= $70,000 ×10%

= $7,000

We simply applied the above formula so that the economic profit could come

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\arge\boxed{\large\boxed{\$ 117,788}}

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              Average\text{ }cost(x)=Cost(x)/x\\\\Average\text{ }cost(x)=(A+Bx)/x\\

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              14=(22,500+7,700B)/7,700\\\\14\times 7,700=22,500+7,700B\\\\107,800-22,500=7,700B\\\\85,300/7,700=B\\\\B=11.08

Now you can complete the cost equation:

             

               Cost(x)=\$ 22,500+11.08x

And to predict the total costs for 8,600 bats you must subsitute x with 8,600 in the previous equation:

             Cost(8,600)=\$ 22,500+11.08(8,600)=\$ 117,788

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