A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. The firm’s factory sits on land owned by the firm that could be rented out for $30,000 per year. What was the firm’s economic and accounting profits last year?
3) In question 2 calculate the firm’s accounting and economic profits, if the firm decided to get a bank loan with 2% interest rate to cover all the firm’s expenses.
4) In question 2 calculate the firm’s accounting and economic profits, if the firm’s owners paid all firm’s expenses from their personal saving account with 5% APR.