Asked by Dominic Gomez on Jun 12, 2024
Verified
Refer to Scenario 7.5. A yearly normal return for your company is
A) $25,000.
B) $35,000.
C) $45,000.
D) $70,000.
Normal Return
The minimum profit necessary for a company to remain viable in its industry, often considered the opportunity cost of capital.
Own Capital
The value of the assets owned by a company or individual that are used in the production process or for investment purposes.
- Identify the purpose and process for determining the normal rate of return in the context of firm economics.
Verified Answer
MB
Marquitta BuxtonJun 18, 2024
Final Answer :
C
Explanation :
A normal return is the minimum profit necessary to keep a firm's resources in their current use, in this case, the $45,000 a year return the owner could have earned by investing the capital elsewhere.
Learning Objectives
- Identify the purpose and process for determining the normal rate of return in the context of firm economics.