Asked by Kamia Bryan on Jul 15, 2024
Verified
You borrow $20,000 at an interest rate of 6% to open Candy Dan's, a gourmet sweet shop. If the return on your investment is ________, then you will earn an economic loss.
A) less than 6%
B) exactly 6%
C) greater than 6%
D) It is indeterminate from the given information.
Economic Loss
A situation where the cost of producing a good or service exceeds the revenue generated from its sale.
Investment
Positioning resources, particularly money, with the expectation of accruing income or a profit.
- Absorb the notion of economic profit and its contrast to return on investment and interest rates within the market.
Verified Answer
DM
Dionna ManningJul 15, 2024
Final Answer :
A
Explanation :
If the return on your investment is less than the interest rate of 6%, you will earn an economic loss because you are paying more in interest than you are earning from the investment.
Learning Objectives
- Absorb the notion of economic profit and its contrast to return on investment and interest rates within the market.