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?