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Rafidah was earning $100,000 a year working as a scientist for a drug company. She decided to start her own business that conducted drug trials. She estimates this entrepreneurial talent or forgone entrepreneurial income to be $10,000 a year. She used $500,000 in savings that earned 5 percent interest annually to finance the new business. In the first year, the firm earned revenue of $1,500,000. The costs for rent, supplies, and employees' salaries were $1,100,000. What was the accounting profit for the new business? What was the economic profit (or loss)? describe your calculations for both problems.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M940611

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