Imagine Tom's Annual Salary as an Assistant Store Manager Is

question 2

Multiple Choice

Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.Has Tom made the best decision?

• A) Yes, because he's earning an accounting profit of $35,000.
• B) No, because he's earning an economic profit of $6,000.
• C) Yes, because his accounting profit is larger than his economic profit.
• D) No, because his accounting profit is larger than his economic profit.

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Definitions:

Iron Ore

Naturally occurring rocks from which iron (Fe) can be economically extracted, constituting a key raw material for steel production.

Coal

The natural, brown to black rock derived from peat and other plant materials that have been buried, compacted, and heated; used for heating and to generate electricity.

Marine Organisms

Living creatures that inhabit the ocean, ranging from microscopic phytoplankton to large whales, adapted to the marine environment.

Organic Material

Matter derived from living organisms, including plants, animals, and their byproducts, which can decompose into soil.