Dr.Khan starts his own dental practice after quitting his $150,000 job at The Mall Dental Clinic.His revenues for the first year are $500,000.He paid $90,000 in rent for the dental office,$60,000 for his office manager's salary,$24,000 for the dental hygienist,$150,000 for insurance,and $6,000 for other miscellaneous costs.The normal profit from running his business is $20,000.

Question

Quizplus · Accepted Answer

Explicit costs are those expenses that require a monetary payment, which for Dr. Khan includes rent, salaries, insurance, and other miscellaneous costs, totaling $330,000 (A). Implicit costs are the opportunity costs of the resources the owner has invested in the business, which include his own salary at The Mall Dental Clinic, which was $150,000. Therefore, implicit costs are $150,000 + the normal profit of $20,000, totaling $170,000 (B). Economic profit subtracts both explicit and implicit costs from revenues, which gives a result of $500,000 - $330,000 - $170,000 = $0 (C). Therefore, all options A, B, and C are correct (E).

DrKhan Starts His Own Dental Practice After Quitting His $150,000