Suppose That You Open Your Own Business and Earn an Accounting

question 63

Multiple Choice

Suppose that you open your own business and earn an accounting profit of $35,000 per year. When you started your business, you left a job that paid you a $30,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your business. If the normal rate of return on capital is 10 percent, your economic profit is

• A) $5,000.
• B) -$5,000.
• C) $2,000.
• D) -$2,000.

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Definitions:

Regulatory Changes

Adjustments or modifications in laws and regulations that affect how businesses operate.

Competitive Pressure

The influence exerted by competing businesses in a market, driving companies to improve products, services, and efficiency.

Entrepreneurial Mind-Set

A mindset that embraces innovation, risk-taking, and the pursuit of new business opportunities.

Nonquantitative Signals

Indicators or information used in analysis or decision-making that are not expressed in numerical or statistical form.