How much profit is the entrepreneur earning from the point of view of the person on the street? To… 1 answer below »

A firm pays $200,000 in wages, $50,000 in interest on borrowed money capital, and $70,000 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager she would earn at most $40,000 per year, and if she lent out her money capital to somebody else in a similarly risky business, she would at most receive $10,000 per year. She owns no land or building.

a. Calculate the entrepreneur’s economic profit if she received $400,000 from selling her year’s output.

b. How much profit is the entrepreneur earning from the point of view of the person on the street? To what is the difference in the results due?

What would happen if the entrepreneur’s total revenue were $360,000 instead?

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