Suppose an Entrepreneur Starts a Business Earning $2M in Revenue

question 13

Multiple Choice

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

• A)$200K,-$100K
• B)$200K,$100K
• C)$300K,$100K
• D)$300K,-$100K
• E)$200K,$200K

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Definitions:

Tax Burden

The measure of the total amount of taxes paid by an individual, a business, or another entity to the government.

Tax Burden

Refers to the total amount of tax that individuals or businesses must pay, relative to their income or profit.

Binding Price Ceiling

A limit imposed by the government on how high a price can be charged for a good or service, which is set below the equilibrium price, causing a shortage.

Tax Revenue

Government income obtained from taxation.