Harvey quit his job at state university where he earned $45,000 a year. he figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. to start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, extreme gaming. in the first year, the firm sold 11,000 units of software at $75 each. of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. the economic profits of harvey's firm in the first year were: a) $160,000b). $280,000.c) $155,000.d) $220,000.

option (a) $160,000

Explanation:

The economic profit is calculated as:

Economic profit = Total revenue - ( Explicit cost - Implicit cost )

Now,

Total revenue = Units sold × Unit price

= 11,000 × $75

= $825,000

Explicit cost = Units sold × Per unit cost of production

= 11,000 × $55

= $605,000

also,

Harvey quit his job at State University where he earned $45,000 a year

foregone entrepreneurial income to be $5,000 a year

To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company

Therefore,

Implicit cost = $45,000 + $5,000 + ( 10% of $100,000 )

= $50,000 + $10,000

= $605,000

Hence,

Economic profit = $825,000 - ( $605,000 - $605,000 )

= $160,000

so the correct answer is option (a) $160,000

it's actually a very difficult task, due to not many people can make 2 million dollars in 2 years. besides that, to the not-so-realistic ideas, you can create a business. it could be practically anything, but make it into a business that isn't that known yet, you get me? also, lets not forget about stock market. that's where all the good stuff happens. use investments at the beginning and begin to raise up your business or whatever you're going to do. as this is a very non-realistic idea, it's still worth the shot!