Sonya used to sell real estate and earn $25,000 a year, but now she sells greeti

Question

Sonya used to sell real estate and earn $25,000 a year, but now she sells greeting cards. Normal profit for the retailers of greeting cards is $14,000. Sonya used 4,000 of her savings to start her business. Over the past year, Sonya bought $10,000 worth of cards from manufacturers of cards. She sold these cards for $58,000. Sonya rents a shop for $5,000 a year and spends $1,000 on utilities and office expenses. Sonya owns a cash register, which she bought for $2,000 with part of her savings account money. Her bank pays 3% a year on savings accounts. She calculated her entrepreneurial income to be worth $500.

Calculate Sonya

Explanation / Answer

Hi,

Please find the correct answer as follows:

Sonyas explicit costs are $10,000 + $5,000 + $1,000

So Sonyas explicit costs are $16,000.

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Sonyas implicit costs are $25,000 in forgone income as a real estate agent, $14,000 normal profit, $60 in forgone interest, and $400 in economic depreciation on the cash register, for a total of $39,460.

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Sonyas economic profit e= $58,000 - $55,640.

= $2,360.

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