You borrow $20,000 at an interest rate of 6% to open Candy Dan's, a gourmet sweet shop. You will earn an economic profit if the return on your investment is

Question

Quizplus · Accepted Answer

Economic profit occurs when the return on investment exceeds all costs, including the opportunity cost of capital. Here, the opportunity cost is the 6% interest rate, so earning more than 6% means making an economic profit.

You Borrow $20,000 at an Interest Rate of 6% to Open