Lilly's Lumberyard had the following revenues and costs last year: Costs If Lilly did not own a lumberyard, she would earn $115,000 per year as a store manager for Home Depot. Lilly's Lumberyard had an economic cost of _____ and an economic profit of _____.

Question

Lilly's Lumberyard had the following revenues and costs last year: Costs  If Lilly did not own a lumberyard, she would earn $115,000 per year as a store manager for Home Depot. Lilly's Lumberyard had an economic cost of _____ and an economic profit of _____.

Quizplus · Accepted Answer

To find the economic cost, we subtract the opportunity cost (what Lilly could have earned as a store manager) from the total revenue (costs in this case):
$610,000 - $115,000 = $495,000
To find the economic profit, we subtract the economic cost from the actual revenue (costs in this case):
$610,000 - $495,000 = $115,000
Therefore, the economic cost is $495,000 and the economic profit is $115,000, which is only reflected in choice C.

Lilly's Lumberyard Had the Following Revenues and Costs Last Year