During a year of operation, a firm collects $50,000 in sales revenue and spends $10,000 on salaries of workers, $1,520 on electricity and utilities, $6,000 on raw materials. The firm owner had to leave his job which was paying $30,000 of annual salary. The firm owner also used $5,000 of his personal savings, which was earning a guaranteed 5 percent annual rate of return. The owner's equity capital? The firm's economic profit?

During a year of operation, a firm collects $50,000 in sales revenue and spends $10,000 on salaries of workers, $1,520 on electricity and utilities, $6,000 on raw materials. The firm owner had to leave his job which was paying $30,000 of annual salary. The firm owner also used $5,000 of his personal savings, which was earning a guaranteed 5 percent annual rate of return. The owner's equity capital? The firm's economic profit?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 12P

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During a year of operation, a firm collects $50,000 in sales revenue and spends $10,000 on salaries of workers, $1,520 on electricity and utilities, $6,000 on raw materials. The firm owner had to leave his job which was paying $30,000 of annual salary. The firm owner also used $5,000 of his personal savings, which was earning a guaranteed 5 percent annual rate of return. calculate The firm earns accounting profit, The firm's economic profit.
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