Mr. Smith, a high school teacher in Gander, decided to quit his current job and opened a private tutorial firm. He gave up his $38,940 a year job as a teacher. He used $27,500 of his savings that generated 3.12 per cent annual interest income to start his business. At the end of the first year, Mr. Smith received $72,658 as tuition. He taught the students at the basement of his house where he could have rented it out for $525 per month. He also asked his sister to take care of the firm's administration. If Mr. Smith had wanted to hire someone he should have paid additional $16,000 per year. Assuming equipment rental did not change with the number of enrollment; expenses for the year were as follows: Chalk for Classes $450 Notes and Paper for Students $ 3,640 Class Equipment Rental $6,000 Other Expenses $ 4,285 Calculate both the accounting and economic profits for Mr. Smiths firm.

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To calculate both the accounting and economic profits for Mr Smiths firm we need to consider the rev... View the full answer