Calculate Lees opportunity cost of production and his economic profit. Lee is a computer programmer who earned
Question:
Calculate Lee’s opportunity cost of production and his economic profit.
Lee is a computer programmer who earned $35,000 in 2009. But on January 1, 2010, Lee opened a body board manufacturing business. At the end of the first year of operation, he submitted the following information to his accountant: ■ He stopped renting out his cottage for $3,500 a year and used it as his factory. The market value of the cottage increased from $70,000 to $71,000. ■ He spent $50,000 on materials, phone, etc. ■ He leased machines for $10,000 a year. ■ He paid $15,000 in wages. ■ He used $10,000 from his savings account, which earns 5 percent a year interest. ■ He borrowed $40,000 at 10 percent a year. ■ He sold $160,000 worth of body boards. ■ Normal profit is $25,000 a year.
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