A firm develops a unique software application. In its first year, it generates total revenue of $500,000. The firm's explicit costs, including salaries and rent, are $300,000. The owner invested $200,000 of personal savings into the business; these funds could have otherwise earned a 5% annual return in a stock market index fund. Additionally, the owner gave up a previous job that paid an annual salary of $80,000 to run this new firm. What is the firm's economic profit for the year?
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Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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A firm develops a unique software application. In its first year, it generates total revenue of $500,000. The firm's explicit costs, including salaries and rent, are $300,000. The owner invested $200,000 of personal savings into the business; these funds could have otherwise earned a 5% annual return in a stock market index fund. Additionally, the owner gave up a previous job that paid an annual salary of $80,000 to run this new firm. What is the firm's economic profit for the year?
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A specialty coffee shop, known for its unique single-origin beans, sells 50,000 cups of coffee in a year at an average price of $4.00 per cup. The shop's explicit costs for the year (rent, wages, supplies) total $120,000. The owner, who manages the shop, gave up a previous job that paid $60,000 per year. To start the business, the owner invested $100,000 of personal savings, which could have otherwise earned a 10% annual return in a safe investment. Based on this information, the statement 'The coffee shop's economic profit for the year is $20,000' is true.