This question is actually very straightforward if you remember the way Economists define profit. Remember that profit means earnings above what could be earned in your next best opportunity. So, tavern owners only earn economic profit after they meet all costs of doing business including paying themselves a salary equal to what would be earned in their next best opportunity. While people with extraordinary skills, talents, and a great deal of education may well own bars, such skills and talents and training aren't necessary so that the average salary of bar owners in their next best opportunity may be about equal to average earnings in the city. Lawyers, on the other hand, almost certainly have 7 or more years of education after high school (4 years college + 3 years law school). That same amount of training would almost certainly guarantee them higher earnings even if they weren't lawyers so zero profit will still allow themselves to earn a higher income that the typical tavern owner. 1. Suppose local taverns (bars) and the legal profession are both characterized as monopolistic competition with free entry, so in long run equilibrium economic profits will be the same in the two industries. Suppose a study shows that, even in this setting, on average, lawyers have much higher incomes than tavern owners. How can we explain this seeming inconsistency?

1. lawyers define profit differently than tavern owners do. It is unlikely that they define profit differently except for some accounting details, but we care about how economists define profit.
2. lawyers are better at investing money than tavern owners so the forgone interest on their investment is higher than it is for tavern owners. Even if this is true, and there is no particular reason this need be the case, tavern owners can hire investment counselors if need be and probably do as well as the typical lawyer.
3. Attorneys don't have to pay for liquor licenses and deal with health inspectors and so their costs of doing business will always be lower. Tavern owners don't need nice offices, expensive clothes, secretaries, computers, investigators etc. All these details of specific business expenditures are irrelevant.
4. Being a tavern owner is more fun than being a lawyer, and tavern owners don't need to pay themselves as large a salary since their opportunity costs are zero. There actually may be some truth to this but as a matter of playing it safe never choose an answer like this on a real test unless you've heard your prof say almost this exact thing in class.. It may also be that being a lawyer, while not more fun, carries more prestige which might negate the fun of owning a tavern.
5. Due to the higher level of education of the typical attorney relative to the typical bar owner, their forgone salary is higher. Thus, to make zero profit an lawyer must have a higher income than a tavern owner.

     

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