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Microeconomics

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Market Surplus: Who Needs Mom?

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Gerald was offered a spot in the family business, where he would have earned \$100,000 per year. Instead, he has gone into business for himself, selling coffee mugs.

Every year, he is able to sell 50,000 mugs at a price of \$4 apiece. To make the mugs, he bears some costs:
\$60,000 in labor costs
\$10,000 in machine repair
\$40,000 to pay licencing fees to make mugs for popular cartoon characters

What is the accounting profit that Gerald earns from his business?



What is the economic profit that Gerald earns from his business?