Suppose Gina gives up a job paying $30,000 a year so that she can start her own pizza business. She takes $100,000 from her savings account (which paid a 6 percent rate of interest) to pay for equipment, materials and labor, and after one year her total revenue is $70,000. Gina's profit-related income is

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Gina's profit-related income is calculated by subtracting her opportunity costs and actual costs from her total revenue. Her opportunity costs include her forgone salary ($30,000) and the interest she would have earned on her savings ($100,000 * 6% = $6,000), totaling $36,000. Her actual revenue is $70,000. Therefore, her profit-related income is $70,000 (revenue) - $36,000 (opportunity costs) = $34,000.

Suppose Gina Gives Up a Job Paying $30,000 a Year