Refer to Scenario 7.4 below to answer the question(s) that follow.
SCENARIO 7.4: You own and are the only employee of a company that sells custom embroidered pet sweaters.
Last year your total revenue was $120,000. Your costs for equipment, rent, and supplies were $30,000.
To start this business you invested an amount of your own capital that could pay you a $50,000 a year return.
-Refer to Scenario 7.4. A yearly normal return for your company would be
A) $40,000.
B) $50,000.
C) $70,000.
D) $90,000.

Question

Quizplus · Accepted Answer

A yearly normal return is the opportunity cost of the capital invested in the business. In this scenario, it's the $50,000 a year return you could have earned elsewhere with your invested capital.