Question

George earns $50,000 business profit per year by selling donuts. He pays $12,000 per year in rent to his Uncle Fred for the building in which his business is located. If his Uncle Fred gives him the building, then George's A. business profit will be unchanged. B. economic profit will be unchanged. C. implicit cost will decrease by $12,000 per year. D. All of the above are correct.

Answer 1

Answer:

None of the multiple choices is correct. The correct answer should be: "Business profit will increase by $12,000 per year"

Explanation:

$12,000 per year is the rental rate.

If his Uncle Fred gives him the building, George will not pay the rental fee. Thus, the business profit will increase by $12,000 per year.

If we consider about the economic profit or implicit cost, it will not change.