Zero economic profit, in simple terms means break even point. It is a situation or point where total revenue of a company must be equal to total cost. This can be represented as:
Total revenue-Total cost = 0
In this case, Mary's accounting profits need to be $175,000 so that she can attain zero economic profit.
Explanation: Investment made to business = $1 million which if Mary would have invested in risk-free bond, then she would have earned $100,000 per year. So, $100,000 is a cost.
Also, she left job(to devote time to business) from which she was earning $75,000 per year as salary. But as she left the job, this amount is also gone.
So, this is also a cost for her.
Now,
Total cost = $100,000 + $75,000 = $175,000
To attain zero economic profit Mary' accounting profit should be $175,000.
