Question
Flora opened a flower shop. She rented a building for $9,000 a year. To buy for $10,000 worth of equipment for the store, she withdrew
Flora opened a flower shop. She rented a building for $9,000 a year. To buy for $10,000 worth of equipment for the store, she withdrew $10,000 from her savings account, which earned an annual interest rate of 3 percent. During the first year of operation, Flora paid $4,000 for utilities and $12,000 to her suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Flora had not started this business, she would have continued to work as an employee at another flower shop for $30,000 a year.Does Flora earn any economic profits or suffer economic losses? Explain and show all your calculations.
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