Question

Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were

Answer 1

Answer:

Economic profit = $0

Explanation:

Economic profit = Revenue - Opportunity cost

Economic profit = $35,000 - (30,000 + (10% x 50,000))

Economic profit = $35,000 - $35,000

Economic profit = $0

Economic profit can be calculated by deducting the opportunity cost from the revenue earned. Here the economic profit is $0 as Ben lost his salary of $30,000 and the interest on retirement fund just for $35,000 revenue.  

Answer 2

The economic profit is zero.

Important information:

He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000.

Calculation of the economic profit:

Economic profit = Revenue - Opportunity cost

Economic profit = $35,000 - (30,000 + (10% x 50,000))

Economic profit = $35,000 - $35,000

Economic profit = $0

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