An owner of a local convenience store has put $300,000 into his business. Before starting his business, he was working in a restaurant. His annual salary was $25,000 per year. Savings accounts are currently paying 5% annual interest. The owner's total annual sales from the business are $60,000. His annual expenses are merchandise ($3000), rent ($1000), insurance ($500), and advertising ($200).

           a.        What is his annual accounting profit?

b.        What is his annual economic profit?

           c.        Should this owner continue with his convenience store business?

           d.        Is it possible for a firm to incur an economic loss and earn an accounting profit at the same time? Explain.

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