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Jill resigns
from her job, at which she was earning $ 40,000 per year, and uses her $120,000
savings,
on which she was
earning 5 percent interest, to start a business. In the first year, she earns
revenue of
$200,000, and her
costs are as follows:
Rent $25,000
Utilities $12,000
Wages $30,000
Materials $20,000
a. Calculate Jill’s
accounting profit.
b. Calculate Jill’s
economic profit.
c. What makes
economic profit different from accounting profit?
