Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.

At the end of the first year of operating his new business, Victor’s accountant reported an accounting profit of $150,000. What was Victor’s economic profit?
a. -$150,000
b. -$50,000
c. -$25,000
d. $25,000

What is Victor’s opportunity costs of operating his new business?
a. $25,000
b. $75,000
c. $100,000
d. $175,000

How large would Victor's accounting profits need to be to allow him to attain zero economic profit?
a. $100,000
b. $125,000
c. $175,000
d. $225,000

Economic profit = -$25,000    option c

Opportunity cost = $175,000  option d

Accounting profit to allow for zero economic profit = $175,000 Option c

Explanation:

Economic profit is the difference between revenue and implicit cost. Implicit cost is the sum of out-of-pocket accounting cost and opportunity cost.

opportunity csot is the value of the benefit sacrificed in favour of a decision.

Economic profit = Accounting profit - opportunity cost

Opportunity cost for victor includes

1. The $100,000 per year which he would have earned had he invested the  money in a bond

2. The annual salary of $75000 he forfeited

Total opportunity cost = 100,000 + 75,000= $175,000

Economic profit = 150,000 -175,000 = -$25,000

To attain an economic profit of zero , the accounting profit ought to be the same at the opprotunity cost of $175,000

Economic profit = -$25,000    option c

Opportunity cost = $175,000  option d

Accounting profit to allow for zero economic profit = $175,000 Option c

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi