Micro Final (Chapter 13)

John has decided to start his own lawn-mowing business. To purchase the mowers and the trailer to transport the mowers, John withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is John's annual cost of the financial capital that has been invested in the business?

$170

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she turned down three separate job offers with annual salaries of $30,000, $40,000 and $45,000. What is Jacqui's economic profit from running her own business?

$5,000

Economists normally assume that the goal of a firm is to

Maximize profit

Explicit costs

Require an outlay of money by the firm

Implicit costs

do not require an outlay of money by the firm

The amount of money that a firm pays to buy input is called

total cost

Economic profit

will never exceed accounting profit