An entrepreneur is deciding whether or not to open up a new gym. He currently ma
ID: 1256591 • Letter: A
Question
An entrepreneur is deciding whether or not to open up a new gym. He currently makes $50,000 per year as a personal trainer and will have to give up this job if he opens the gym. If he opens the gym, it will cost $100,000 per year in rent and other operating expenses. He expects to earn a revenue of $180,000 per year if he opens the gym. Which of the following statements is true regarding the entrepreneur’s annual expected profit? The accounting profit is $100,000 and economic profit is $50,000 The accounting profit is $30,000 and economic profit is $80,000 The accounting profit is $80,000 and economic profit is $30,000 The accounting profit is $80,000 and economic profit is $130,000
Explanation / Answer
An entrepreneur is deciding whether or not to open up a new gym. Which of the following statements is true regarding the entrepreneur’s annual expected profit?
The accounting profit is $80,000 and economic profit is $30,000.
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