Question

Score: 0 of 1 pt 2 of 10 (1 complete) Text Problem 1.2 Question Help After working for 25 years as personal fitness trainers while raising their kids, three sisters cashed in a total of $80,000 in bonds and decided to open a small, neighborhood fitness center. They spent the $80,000 on exercise equipment, advertising, computer equipment, and other furnishings for the business. For the next 3 years, they took in $135,000 in revenue each year, paid themselves $33,000 annually each, and rented a space in a strip mall for $30,000 per year. Before the investment, their $80,000 in bonds were earning interest at a rate of 14 percent. Are they now earning economic profits? Explain your answer. A. They are earning profits of 5 - 5,200, which takes into account the $11,200 opportunity cost of their capital and the $99,000 combined opportunity cost of their own labor B. They are earning profits of $25,000, which takes into account the $80,000 opportunity cost of their capital. OC. They are earning profits of $93,800, which takes into account the $11.200 opportunity cost of their capital OD. They are earning profits of $105,000, which takes into account the opportunity cost of their capital ve ads 9/month 3 ht

Answer 1

Implicit cost = 0.14 * 80000 = 11200

Explicit cost = 33000 * 3 + 30000 = 129000

Economic profit = 135000 - 129000 - 11200 = -5200

First option is correct answer