Question

"Al quit his job as a manager at North End Savings bank where he earned $105,000 a year. He cashed in $300,000 in corporate bonds that earned 2% interest annually to set up a gym. Al has decided to buy a store front and set up exercise classes. There are 900 people who will pay $1200 a year for unlimited classes; $850 from each person goes for"

Answer 1

the question is incomplete, so I looked for more information:

"...for instructors, rent, maintenance, equipment, insurance, depreciation etc.

Write your answers to the following questions on the answer sheet.

A. What are Al’s total revenues?

B. What are Al’s explicit costs?

C. What is his accounting profit?

D. List 2 in numbers 2 implicit costs that Al has not included.

E. What is Al ’s pure economic profit (or loss) in numbers?"

a) Al's total revenues = 900 x $1,200 = $1,080,000

b) Al's explicit costs = 900 x $850 = $765,000

c) accounting profit = $1,080,000 - $765,000 = $315,000

d) implicit costs = $105,000 (in lost wages) + $6,000 (in lost interests) = $111,000

e) pure economic profit = $315,000 - $111,000 = $204,000