Neville is a lawyer at a large law firm where he earns a salary of $170,000 per year. He is thinking of leaving the firm to set up his own law office. To do this, he would need to invest $140,000 of his savings, which currently earns 5% in interest each year. He estimates that if he starts a law office, his annual revenue will be $510,000, and his explicit financial costs will be $300,000. How much would Neville earn in economic profits or losses if he starts his own law office

$33,000

Explanation:

Economic profit = accounting profit - implicit cost

Accounting profit= total revenue - explicit cost

Explicit cost includes the amount expended in running the business. They include rent , salary and cost of raw materials

Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives

Accounting profit = $510,000 - $300,000 = $210,000

Implicit costs = amount he would forgo as salary in the large law firm and interest he would lose on his investment

Interest he would lose on his investment = 0.05 x 140,000 = $7000

Implicit cost = $170,000 + $7000 = $177,000

Economic profit = $210,000 -  $177,000 = $33,000

support your answer using the data presented. (5 points). 4. based on the information you used to schedule and curve, which product would you recommend the shoe hut focus on, and why? provide details that support your answer. (5 points).

answer; the correct answer is (0.08);