Asked by christopher Neville on Jun 18, 2024
Verified
You borrow $20,000 at an interest rate of 6% to open Candy Dan's, a gourmet sweet shop. You will earn an economic profit if the return on your investment is
A) between 0 and 6%.
B) 6%.
C) greater than 6%.
D) only greater than 10%.
Economic Profit
The distinction between total sales and the aggregate of both explicit and implicit expenses for a firm.
- Acquire knowledge about economic profit and its comparison with return on investment and interest rates in the market.
Verified Answer
QJ
Qiana JohnsonJun 19, 2024
Final Answer :
C
Explanation :
Economic profit occurs when the return on investment exceeds all costs, including the opportunity cost of capital. Here, the opportunity cost is the 6% interest rate, so earning more than 6% means making an economic profit.
Learning Objectives
- Acquire knowledge about economic profit and its comparison with return on investment and interest rates in the market.