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Question
Suppose that you open your own business and earn an accounting profit of $30,000 per year. When you started your business, you left a job that paid you a $25,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your business. If the normal rate of return on capital is 5 percent, your economic profit is
A) $5,000.
B) -$1,500.
C) $1,500.
D) -$5,000.
Answer
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