Freelance Business Profit Analysis
A graphic designer quits a job paying $60,000 per year to start a freelance business. In the first year, the business earns $100,000 in total revenue. The explicit costs for software, marketing, and office supplies are $25,000. To start the business, the designer used $20,000 from a personal savings account that was earning 5% interest annually. Calculate the business's economic profit for the first year. Show your calculations.
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
Cognitive Psychology
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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.