In 2014, Max taught music and eamed $20,000 On January 1, 2015, he quit teaching

Question

In 2014, Max taught music and eamed $20,000 On January 1, 2015, he quit teaching and started a Web site design business. The information on the right describes his first year in the new business In 2014, Max taught music and eamed $20,000. In 2015, A. $28,000: $62,000 B. $4,000 $59 580 C. $59,580, $4,000 D. $58,080, $8.000 instead. i He paid $2.500 for the lease of a Web Server and $1,500 for high-speed Internet service. i He eamed interest at 2 percent a year on his savings account balance. He took $4,000 from his savings account to buy a computer O A. 36,420 O B. 1,420 O C. 35,000 OD, 5,420 O E. 61,000 v At the end of 2015, Max could have sold his computer for $2,500. v He recelved a total revenue of $65,000 from his

Explanation / Answer

Depreciation on computer= 4000-2500=1500

Interest foregone on savings= 4000*2/100= 80

Explicit cost= 2500+1500= 4000

Implicit cost= 35000+20000+3000+80+1500=59580

So B is correct

Economic profit= total revenue-implicit cost

=65000-59580=5420

D is correct

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