Joanne left her last job, in which she was earning $50,000, in order to form her own consulting business. Her revenues for the first year of consulting were $200,000. During that year, she hired two assistants for $25,000 each and spent $25,000 on office equipment. In addition, she incurred $75,000 in miscellaneous expenses. Her economic profit that first year was

Question

Quizplus · Accepted Answer

Economic profit = Total revenue - (Explicit costs + Implicit costs)= $200,000 - ($25,000 x 2 + $25,000 + $75,000 + $50,000)= $200,000 - $175,000= $25,000

Joanne Left Her Last Job, in Which She Was Earning