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# Answer to Question #107438 in Microeconomics for Hiba

Question #107438
Gomez runs a small pottery firm. He hires one helper at $10,500 per year, pays annual rent of$4,500 for his shop, and spends $19,000 per year on materials. He has$40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,000 per year if alternatively invested. He has been offered$21,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual revenue from pottery sales is$71,000.

a. Calculate the accounting profit for Gomezâ€™s pottery firm. $. b. Now calculate Gomez's economic profit.$
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2020-04-02T10:35:49-0400

a. Calculate the accounting profit for Gomezâ€™s pottery firm. $37,000Â$ 37,000 = 71,000 - ($10,500 for the helper +$4,500 for rent + $19,000 for materials) b. Now calculate Gomez's economic profit.$ 8,000Â

$8,000 = 37,000 - ($5,000 of forgone interest + $21,000 of forgone salary +$3,000 of entrepreneurship)

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