Scenario 13-11
Zach withdrew $400,000 out of his personal savings account and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also during the first year, the cookie business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Zach's time.
-Refer to Scenario 13-11.Zach's economic profit for the year was
A) $-506,000.
B) $-6,000.
C) $3,000.
D) $6,000.

Question

Quizplus · Accepted Answer

Zach's revenue from selling 6,000 boxes of cookies at $2.50 per box is $15,000. However, he also had monetary outlays of $9,000 during the year. Additionally, he could have earned $12,000 from the 3% interest on his $400,000 savings, which is an opportunity cost of using that money to start his business. Therefore, his total economic profit for the year is ($15,000 - $9,000 - $12,000) = -$6,000.

Scenario 13-11 Zach Withdrew $400,000 Out of His Personal Savings Account and Account