Mr. Afzal runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5000 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 $4000 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 $3000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Afzal’s pottery firm
Mr. Afzal runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5000 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 $4000 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 $3000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Afzal’s pottery firm
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis
Section: Chapter Questions
Problem 10TY
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Mr. Afzal runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5000 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 $4000 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 $3000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Afzal’s
pottery firm.
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