Scenario: Accounting and Economic Profit

Essay

Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job that paid $60,000 per year and started Wang's Wicker Furniture Store.He rented a showroom for $15,000 for the year, purchased capital equipment that depreciates $5,000 each year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising.Instead of using the capital for his own business he could rent it to a rival firm and earn
$5,000 a year, In his first year, his revenue was $150,000.
(Scenario: Accounting and Economic Profit) The implicit cost of capital for Wang's Wicker Furniture Store is:
A.$0.
B.$2,000.
C.$5,000.
D.$50,000.