PROBLEM 8B Accounting and Economic Profit Suppose there was a Potter who invested $50,000 of his own money and gave up $15,000/year working for someone else in order to run his own pottery business. He estimates his TR this year to be $92,000 and that he could have earned 10% on his money invested. He also feels that his business skills are worth $8,000/year. Other costs incurred include $14,000 paid to a helper, $5,000 in rent, and $20,000 in materials. Determine the economic and accounting profit.

8c Suppose last year you went into business buying and selling used textbooks. It cost you $10,000 to buy used books from students at the end of the term. The purchase was financed by a bank loan that has been repaid with an interest cost of $665. In addition, paid part-time help cost $7,000 for the year. You operated your business out of your garage and paid utility expenses of $500 annually. You bought a cash register, book shelves, etc. with $1,200 from your savings account. Your part-time help happened to be an accounting student who told you that you should make an allowance of $200/year for the wear and tear on the $1,200 of equipment you bought. You estimate that you worked 500 hours in your store but did not take any wage payment. The previous year you had worked in the campus bookstore and were paid $5 per hour. You used to rent your garage for $20 per month. You were getting an interest rate of 10% on your savings. REQUIRED: 1. List the explicit and the implicit costs. 2. Suppose you sold all the purchased books for $21,600. a. Did you make an accounting profit? (yes or no) ______________ How much? ______________ b. An economic profit? (yes or no) ______________ How much? __________