Alyssa runs a "Dessert of the month" delivery service. To operate her business each year, she spends $30,000 on baking supplies (flour, sugar, etc.) , $50,000 on rent for her shop, and $5,000 for utilities. She owns her delivery van, estimating that in alternate uses it could generate $15,000 in income per year. Alyssa has other funds tied up in the business that could earn her $2,000 per year in interest. Alyssa has been offered $50,000 to work full time at a competing bakery. Her bakery generates $160,000 per year in revenue from subscriptions to her monthly service.
Based on the information above, which of the following can we conclude about Alyssa's business?
A) Alyssa is incurring economic losses, so we would expect her to close her business.
B) Alyssa is earning economic profits, so we would expect her to remain in business.
C) Alyssa's economic profits are greater than her accounting profits.
D) Alyssa would be better off working for the competing bakery.
Correct Answer:
Verified
