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Average rate of return in the economy increases

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Reference no: EM132120598

Could you help me solve the following economic question?

Graduation comes and the Dean has just shaken your hand. But, instead of taking that nice job offer of $130,000, you decide to take your MBA to heart and start your own business. You take $500,000 out of your savings account and start yet another trendy coffee house in campustown. After your first year, your accountant tells you that revenues were $150,000. Your total costs amounted to just $60,000 worth of electricity, cups, and coffee (your place is "minimalist" trendy). There is no depreciation of your capital stock. Your accountant informs you that you have just turned a clear $90,000 profit, but your economics training makes you suspect of this figure. Carefully discuss the profit situation at your coffee house. How does this change if the "average rate of return" in the economy increases?

Reference no: EM132120598

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