Mr. Smith starts his own dental practice after quitting his $150,000 job at The

Question

Mr. Smith starts his own dental practice after quitting his $150,000 job at The Mall Dental Clinic. His revenues for the first year are $500,000. He paid $90,000 in rent for the dental office, $60,000 for his office manager's salary, $24,000 for the dental hygienist, $150,000 for insurance, and $6,000 for other miscellaneous costs. The normal profit from running his business is $20,000.


1. His economic profit is $150,000.

2. His economic profit is zero.

3. His accounting profit is $350,000.

4. His accounting profit is zero.

5. None of the above answers are correct.

Explanation / Answer

normal profit=economic profit So 1 and 2 are wrong. 500-90-60-24-150-6=accounting profit = 170. So 5. None of them.

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