Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The accounting profit of Harvey's firm in the first year was

Question

Quizplus · Accepted Answer

The accounting profit is calculated as the difference between the total revenue and the total costs. The total revenue is $11,000 * $75 = $825,000. The total costs are $11,000 * $55 = $605,000. Therefore, the accounting profit is $825,000 - $605,000 = $220,000.

Harvey Quit His Job at State University, Where He Earned