True, False, or Uncertain [6 marks] Explain why each of the following statements

Question

True, False, or Uncertain [6 marks]

Explain why each of the following statements is True,, False,, or Uncertain according to economic principles. Use diagrams where appropriate. Unsupported answers will receive no marks. It is the explanation that is important.

4. Two Econ profs quit their jobs to launch U&&I Consulting. If the firm generates $350,000/year in revenue , and pays $ 200,000/year in rent , interest on a bank loan, and to employ a research assistant, the venture earns positive accounting and economic profit.

Explanation / Answer

The statement is uncertain because it does not incorporate the opportunity cost which is here the lost salary by the to Econ professors. Accounting profit is positive because it does not take the implicit cost of the opportunity cost of Lost job. But economic profit can be positive negative or zero depending upon the size of the salary that is now sacrificed.

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