Asked by Alanis Matthews on Jul 02, 2024
Scott used $4,000,000 from his savings account that paid an annual interest of 5% and a $60,000 loan at an annual interest rate of 5% to purchase a hardware store.After one year,Scott sold the business for $4,100,000. His economic profits is:
A) $300,000
B) $100,000
C) $97000
D) None.He runs an economic loss of $103,000
Economic Profits
The surplus left after deducting both explicit and implicit costs from total revenues.
Savings Account
A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
Interest Rate
The cost of borrowing money or the return on investment expressed as a percentage, typically on an annual basis.
- Develop an understanding of the framework of economic profits, with a focus on the roles of implicit and explicit costs.
- Recognize the role of opportunity costs in calculating economic profits.
Learning Objectives
- Develop an understanding of the framework of economic profits, with a focus on the roles of implicit and explicit costs.
- Recognize the role of opportunity costs in calculating economic profits.