Lashondra is the owner/operator of an interior design firm.Last year she earned $400,000 in total revenue.Her explicit costs were $200,000 (assume that this amount represents the total opportunity cost of these resources).During the year she received offers to work for other design firms.One offer would have paid her $120,000 per year and the other would have paid her $130,000 per year.Lashondra's economic profit is equal to

Question

Quizplus · Accepted Answer

Lashondra's economic profit is calculated as total revenue minus the explicit costs (including opportunity cost) minus the implicit costs (foregone income from the other job opportunities).

Total revenue = $400,000 
Explicit costs = $200,000 
Implicit costs = $130,000 (from the highest offer)

Economic profit = $400,000 - $200,000 - $130,000 = $70,000

Therefore, the best choice is B, as it represents her economic profit after considering all costs (explicit and implicit).

Lashondra Is the Owner/operator of an Interior Design Firm