Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund and earn 5% each year, Tommy Wang quit his job that paid $60,000 per year and used the $100,000 to start Wang's Wicker Furniture Store. He rented a showroom for $15,000 for the year, purchased $100,000 in capital equipment (an amount that depreciates $5,000 each year), purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was approximately $150,000.
9. (Scenario: Accounting and Economic Profit) The accounting profit of Wang's Wicker Furniture Store is:
A) $200,000. B) $60,000. C) $30,000. D) $0.
10. (Scenario: Accounting and Economic Profit) The implicit cost of capital for Wang's Wicker Furniture Store is:
A) $0. B) $2,000. C) $5,000. D) $50,000.
11. (Scenario: Accounting and Economic Profit) What is the opportunity cost of Wang's $100,000 inheritance?
A) $0 B) $5,000 C) $10,000 D) $100,000
12. (Scenario: Accounting and Economic Profit) What are the implicit costs of Wang's Wicker Furniture Store?
A) $7,000 B) $60,000 C) $65,000 D) $69,000
13. (Scenario: Accounting and Economic Profit) The economic profit of Wang's Wicker Furniture Store is:
A) $67,000. B) $0. C) ? 20,000. D) ? 35,000.
