Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's economic profit for the year?

Question

Quizplus · Accepted Answer

Heidi's economic profit is calculated by subtracting both explicit and implicit costs from the total revenue. The explicit costs are $50,000 (wages) + $20,000 (food) = $70,000. The implicit cost is the $40,000 salary she gave up. Total costs = $70,000 + $40,000 = $110,000. Revenue is $100,000. Economic profit = $100,000 - $110,000 = -$10,000.

Heidi Quit Her Job as a Chef Making $40,000 Per