Bill is a political consultant with his own firm. He travels the country and pro

Question

Bill is a political consultant with his own firm. He travels the country and provides campaign advice for political candidates. Last year he earned $250, 000 in revenue for his services. He pays one employee $50, 000 to manage the small office back home and pays $25, 000 on rent and utilities for that office. Bill owns computing and office equipment that depreciated by $5, 000 last year. His accountant tells him that if he were to sell all of the equipment, he could put that money in the bank and earn $3, 000 in interest next year. A few years ago Bill received a standing offer to teach political science at a college at a salary of $100, 000. Bill's accounting profit is equal to________and his economic profit is equal to_______. $170, 000; $70, 000 $200, 000; $72, 000 $175, 000; $67, 000 $170, 000; $67, 000

Explanation / Answer

Revenue = $250000

Operating expense = $25000

Salary paid = $50000

Depreciation = $5000

Opportunity cost of assets = $3000

Opportunity cost of working in college = $100000

Accounting profit = Revenue - Operating cost - salary paid - depreciation = $170000

Economic Profit = Accounting profit - Opportunity cost = $67000

So answer is D

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