Bud opened a flower shop. He rented a building for 9,000 a year. To buy equipment for the store, he withdrew 10,000 from his savings account, which earned an annual interest rate of 3 percent.
During the first year of operation, Bud paid 4,000 for utilities and 12,000 to his suppliers. The store's total annual revenue was 55,000. The market value of the store's equipment at the end of the year was 8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for 30,000 a year. During the first year of operation, Bud A) received an economic profit of 30,000.
B) received an economic profit of 20,000.
C) incurred an economic loss of 2,300
D) incurred an economic loss of 12,300
Question 2
The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm
A) is a price taker.
B) faces constant returns to scale.
C) wants to maximize its profits.
D) has perfect information.
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