Answer to Question #306894 in Accounting for LALA

Question

Bobby quits his job as a veterinarian to open a model train store. Bobby made$80,000 a year as a veterinarian. The first year his train store is open, Bobby pays a helper $26,000. He also pays $24,000 in rent, $10,000 in utilities, and buys$200,000 of model trains. Bobby had a good year because he sold all of his model trains for $300,000.Bobby’s normal profit is $30,000.

a. What would an accountant calculate as Bobby’s profit?

b. What is Bobby’s total opportunity cost? What is his economic profit?

Answer 1

a)

b) Opportunity cost= $80,000-$40,000= $40,000