You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at another computer software firm that paid $40,000 a year.Last year,your economic profits were:

Question

Quizplus · Accepted Answer

Economic profit is the revenue earned minus all explicit and implicit costs. In this case, the total revenue earned was $75,000, but the owner had to incur $10,000 in expenses for equipment, rent, and supplies. Additionally, the opportunity cost of quitting a job at another computer software firm that paid $40,000 a year must be taken into account. Therefore, the economic profit for the year is $75,000 - $10,000 - $40,000 = $25,000.

You Are the Owner and Only Employee of a Company