Pamela's costs, apart from direct business expenses, are $200,000 from her forgone salary and $200,000 from forgone interest on her winnings. (We're making two simplifying assumptions here, 1. that the lottery winnings are all paid in the first year, not over a period of 20-25 years and 2. that she can recover the $2,000,000 invested if she goes out of business.) Thus, Pamela gave up $400,000 per year in income to start her business. After meeting all her business expenses Pamela is able to pay herself a salary of $300,000. She gave up an income of $400,000 a year to start her business with which she is able to pay herself $300,000, thus she has economic losses of $100,000 in the first year.