Question

You use $50,000 of your own money to start a catering business. During the first year you earn a 5% return on that investment. If the current interest rate is 8%, you earn an economic profit of

Answer 1

Answer:

-$1,500

Explanation:

Calculation for the economic profit earn

Using this formula

Economic profit =Investment amount ×(Return on investment-Current interest rate)

Let plug in the formula

Economic profit =$50,000×(0.05 - 0.08)

Economic profit =$50,000×(-0.03)

Economic profit = -$1,500

Therefore you earn an economic profit of -$1,500