Zhen Left a Job as an Accountant Making $80,000 a Year

question 144

Multiple Choice

Zhen left a job as an accountant making $80,000 a year to open his own business. Zhen now owns his own accounting firm and employs three bookkeepers to help manage his accounts. His total revenue this year was $525,000. Because he is well known for his estate planning and expertise, he is also paid $16,000 per year by a local news station to answer tax questions on their weekly Ask the Accountant segment. His explicit costs for payroll, insurance, taxes, mortgage, and utilities are $390,000. Zhen's economic profit is

• A) $71,000.
• B) $541,000.
• C) $151,000.
• D) $55,000.

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Definitions:

Shortage

A situation in which quantity demanded is greater than quantity supplied.

Purchasing-Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach, suggesting that exchange rates should adjust so that identical goods cost the same in different countries.

Foreign-Currency Exchange

The process of converting one country's currency into another, facilitating international trade and investment through varying exchange rates.

Demand Curve

A graph of the relationship between the price of a good and the quantity demanded.