Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

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Quizplus · Accepted Answer

Economic profit is calculated as total revenue minus total costs (explicit and implicit). Jane's implicit cost is her foregone salary of $223,000. Her explicit costs are $163,000. Therefore, her economic profit is $347,000 (revenue) - $163,000 (explicit costs) - $223,000 (implicit cost) = -$39,000.

Jane Was a Partner at a Law Firm Earning $223,000