Practice question · Estimate
An entrepreneur quits a 40,000€/year job and pays 25,000€/year in business expenses. The business brings in 70,000€ of revenue. Set the slider to her economic profit in € (accounting profit minus forgone salary).
Estimate on a scale from 0€ (0) to 30,000€ (30000).
Hints
- Accounting profit: .
- Now subtract the salary she gave up.
Show the answer
5000 (answers within ±1000 count)
Why
Accounting profit is 45,000€, but the venture’s true margin over her best alternative is €. Economic profit asks not "did I make money?" but "did I beat the road not taken?"
Practise Opportunity Cost
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