Koma borrows $10,000 from her father to open her accounting practice. She cashed in a $10,000savings bond that paid her 4%per year. Komal

agrees to pay her Dad interest of 3% per year. CIBC bank would have loanedKomal the money, but at an interest rate of6% per year. Komal's

explicit costs of this loan from her Dad are

A.

$400.

B.

$900.

C.

$300.

D. $600

Christine wants to sell you a raffle ticket. There is a 1in100 chance that you will win $1,000.

With this raffle, your expected winnings are

A.

$0.

B.

$1,000.

C.

$100.

D.

$10.

The definition of accounting profits can also be written as

A.

Revenues(ObviousCosts+NormalProfits).

B.

Revenues+(ObviousCosts+HiddenOpportunityCosts).

C.

EconomicProfits+HiddenOpportunityCosts.

D.

AccountingProfitsHiddenOpportunityCosts.

If your business earns accounting profits of

$50,000

and has economic profits of

$30,000,

what are your hidden opportunity costs?

(Pay

attention to the negative sign of economic

profits.)

A.

$80,000.

B.

$20,000.

C.

$20,000.

D.

Cannot be computed because of insufficient information.

If your business earns accounting profits of $90,000 and economic profits of $30,000, what are your hidden opportunity costs?

A.

$120,000.

B.

Cannot be computed because of insufficient information.

C.

$60,000.

D.

$60,000.

make up

Nada is a freelance writer who could work for a newspaper at $24,000 a year but instead runs her own business earning revenues of

$98,000 a year. Her only business expenses are $3,000 for writing materials and $17,000

for rent. What are Nada's economic profits from working as a freelance writer?

A.

$44,000

B.

$74,000

C.

$78,000

D.

$54,000