Devlin is a computer programmer who earned $45,000 in 2019. But on January 1, 2020 he opened a custom woodworking business.
At the end of 2020, Devlin submitted the information on the right to his accountant.
Use the question facts to calculate Devlin's opportunity cost of production and economic profit.
Devlin's opportunity cost of production is _____
A. $44,000
B. $98,000
C. $86,400
D. $110,400
Devlin's economic profit is _____
A. $96,000
B. $29,600
C. $25,000
D. $73,600
Question Facts
1. Devlin stopped renting out his cottage for $3,000 a year and used it as his woodworking shop.
2. The market value of the cottage increased from $94,000 to $101,000.
3. He spent $15,000 on materials, phone, utilities, etc.
4. He leased machines for $8,000 a year.
5. He paid $15,000 in wages.
6. He used $20,000 from his savings account, which earns 2 percent a year interest.
7. He borrowed $60,000 at 10 percent a year from the bank.
8. He sold $140,000 worth of furniture.
9. Normal profit is $25,000 a year.
