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

question 68

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.Which of the following statements is true?

• A) Tom has an opportunity cost of $41,000.
• B) Tom earns an accounting profit of $35,000.
• C) Tom experiences an economic loss of $6000.
• D) All of these are true.

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Definitions:

Payments

The act of transferring money or its equivalent in exchange for goods, services, or to fulfill a legal obligation.

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance.

Variable Costs

Expenses that vary directly with the level of production or output, including costs such as raw materials and labor directly involved in manufacturing.

Price Changes

Alterations in the cost of goods or services over time, which can be influenced by factors such as supply and demand.