Question

John operates a small shop specializing in party favors. He owns the building
and supplies all his own labor and money capital. Thus, John incurs no explicit
rental or wage costs. Before starting his own business John earned $1,000 per
month by renting out the store and earned $2,500 per month as a store manager
for a large department store chain. Because John uses his own money capital, he
also sacrificed $1,000 per month in interest earned on U.S. Treasury bonds. John’s
monthly revenues from operating his shop are $10,000 and his total monthly
expenses for labor and supplies amounted to $6,000. Calculate John’s monthly
accounting and economic profits.

Answer 1

Answer:

He owns the building and supplies all his own labor and money capital. Thus, John incurs no explicit rental or wage costs.