Use the Following to Answer Questions

question 124

Multiple Choice

Use the following to answer questions:
Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000.
-(Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business?

• A) $0
• B) $5,000
• C) $10,000
• D) $100,000

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Definitions:

Demand for Labor

The total amount of workers that employers are willing and able to hire at a given wage rate in a certain period.

Union Membership

The state of being a member of a labor union, which is an organization that represents the collective interests of workers in negotiations with employers.

Manufacturing

The process of converting raw materials or components into finished goods through the use of tools, human labor, machinery, and chemical processing.

Right-to-Work Laws

Under the Taft-Hartley Act, states are permitted to pass these laws, which prohibit the union shop. (Union membership cannot be made a condition of securing employment.)