The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's total revenues exceed its total costs, including a normal profit, by

Question

Quizplus · Accepted Answer

To calculate total costs, we add the annual lease on building, payments to workers, utilities costs, and forgone interest on personal funds, which gives us a total cost of:

$22,000 + $120,000 + $8,000 + $6,000 = $156,000

To calculate economic profit, we need to subtract the total cost from the total revenue:

$380,000 - $156,000 = $224,000

However, we also need to consider the value of the entrepreneur's talent in the next best entrepreneurial opportunity, which is $80,000. If we subtract this amount from the economic profit, we get:

$224,000 - $80,000 = $144,000

This is the entrepreneur's economic profit. However, since we know that the entrepreneur's potential earnings as a salaried worker are $50,000, we need to subtract this amount to calculate the total surplus:

$144,000 - $50,000 = $94,000

Therefore, the answer is B, $94,000.

The Following Is Cost Information for the Creamy Crisp Donut