Calculation Of Economic Profit


1. Suppose that Bob leaves a job that pays $50,000 per year in order to open a new sponge business. His insurance cost is $5,000, his material cost is $25,000, his lease payments are $10,000 and his sales revenue is $90,000. Bob's economic profit is:

A) $0.
B) $40,000.
C) $50,000.
D) $90,000.

2. Using information from the figure, if price equals $0.70, the firm should:

A) stay open because it is making an economic profit.
B) stay open in the short run, although it will earn negative profits.
C) stay open because it is making a normal profit.
D) shut down.


These multiple choice questions belong to Economics. The two questions are about finding out economic profit.

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