5- Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4,000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Gomez's pottery firm.
5- Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4,000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Gomez's pottery firm.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter7: Production, Costs, And Industry Structure
Section: Chapter Questions
Problem 39P: A firm is considering an investment that will earn a 6 rate of return. If it were to borrow the...
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![5- Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of
$5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds
invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4,000 per year
if alternatively invested. He has been offered $15,000 per year to work as a potter for a
competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual
revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit
for Gomez's pottery firm.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fea502f3d-a009-4b93-8558-4baa9f0b89fb%2Fc71cfead-783a-471d-9670-e17481dd93ac%2F7uncfhw_processed.png&w=3840&q=75)
Transcribed Image Text:5- Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of
$5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds
invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4,000 per year
if alternatively invested. He has been offered $15,000 per year to work as a potter for a
competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual
revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit
for Gomez's pottery firm.
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