Danielle decides to withdraw her savings of 70000 and invest

Danielle decides to withdraw her savings of $70,000 and invest in starting her own clothing business. She normally earns $3,000 in interest from her savings. If Danielle earned an accounting profit of $60,000 last year, what was her economic profit?

Solution

Economic Profit = Accounting Profit - Opportunity Cost (Interest from savings foregone)

= $60,000 - $3,000

= $57,000

Correct option (E)