Economics Multiple Choice Question – 13 June 2022

An entrepreneur takes out a £500 000 loan at a rate of interest of 10%, and invests a further £500 000 of his own funds to set up a new firm.

In the first year he pays himself a salary of £40 000.

The rate of interest he could have obtained by investing his funds elsewhere is 8%, and the wage he could have earned in alternative employment is £30 000.

By how much will an economist’s calculation of the firm’s first year costs exceed an accountant’s calculation?

Select ONE answer:

1. £20 000
2. £30 000
3. £40 000
4. £50 000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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