In 2020, Toni taught music and earned $20,000. She rented out her basement and earned $4,000. On
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In 2020, Toni taught music and earned $20,000.
She rented out her basement and earned $4,000.
On January 1, 2021, she quit teaching, stopped renting out her basement, and began to use it as the office for her new app designing business.
She took $2,000 from her savings account to buy a computer.
During 2021, she paid $1,500 for the lease of a Web server and $1,750 for high-speed Internet service. Her total revenue from app designing was $45,000 and she earned interest at 5 percent a year on her savings account balance. At the end of 2021, Toni could have sold her computer for
$500.
If normal profit on app designing is $55,000 a year, calculate Toni’s opportunity cost of production and her economic profit in 2021.
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