Suppose your donut shop earns $25,000 in total revenues per month with explicit costs of $12,000 and opportunity costs of $8,000. Your accounting profit is

Question

Quizplus · Accepted Answer

The accounting profit is calculated by subtracting only the explicit costs from the total revenue. Therefore,

Accounting profit = Total revenue - Explicit costs 
Accounting profit = $25,000 - $12,000 
Accounting profit = $13,000

The opportunity costs, which are not considered in accounting profit, are $8,000. Therefore, the total economic cost (which includes explicit and implicit costs) is $12,000 + $8,000 = $20,000. However, the question asks only for accounting profit, so the answer is B, $13,000.

Suppose Your Donut Shop Earns $25,000 in Total Revenues Per