1. (SLO 3) Suppose that you leave a job that pays $40,000/year and use $10,000 of your savings that had been earning $500/year in interest in order to start your own business. In your business, you sell 450 units at $60/unit while paying $12,000 for capital cost and $12,000 for labor cost. Assume there are no other costs than those mentioned here. How much is economic profit?
A) - $13,000
B) $3000
C) $26,500
D) - $37,500
E) - $47,500
2. Which of the following statements about the relationship between economic profits, normal profits and accounting profits is true?
A) Accounting profits are always lower than economic profits.
B) Accounting profits must equal economic profits (by definition).
C) Accounting profits are always greater than normal profits.
D) Accounting profits are equal to or greater than economic profits.