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. Therefore,

Question

Quizplus · Accepted Answer

Economic profit is calculated as total revenue minus total costs (explicit and implicit). Explicit costs are $330,000 (sum of rent, salaries, insurance, and miscellaneous costs). Implicit costs include the forgone salary of $150,000 and normal profit of $20,000, totaling $170,000. Economic profit is zero because $500,000 (revenue) - $330,000 (explicit costs) - $170,000 (implicit costs) = $0.

Dr Khan Starts His Own Dental Practice After Quitting His