# (solution) Use the following information to work Problems 14 and 15. Lee is

Use the following information to work Problems 14 and 15. Lee is a computer programmer who earned \$35,000 in 2009. But on January 1, 2010, Lee opened a body board manufacturing business. At the end of the first year of operation, he submitted the following information to his accountant:

¦  He stopped renting out his cottage for \$3,500 a year and used it as his factory. The market value of the cottage increased from \$70,000 to \$71,000.

¦  He spent \$50,000 on materials, phone, etc.

¦  He leased machines for \$10,000 a year.

¦  He paid \$15,000 in wages.

¦  He used \$10,000 from his savings account, which earns 5 percent a year interest.

¦  He borrowed \$40,000 at 10 percent a year.

¦  He sold \$160,000 worth of body boards.

¦  Normal profit is \$25,000 a year.

14. Calculate Lee?s opportunity cost of production and his economic profit.

15. Lee?s accountant recorded the depreciation on his cottage during 2010 as \$7,000. According to the accountant, what profit did Lee make?