Ben quit his job as an economics professor to become a golf professional.He gave up his salary ($40,000) and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture.After all expenses, his net winnings (profit) were $45,000.Ben's economic profits were

Question

Quizplus · Accepted Answer

Economic profit is equal to accounting profit minus implicit costs. Implicit costs are the opportunity costs of the resources used in production. In this case, Ben's implicit costs are his salary and the interest he could have earned on his retirement fund. His salary is $40,000 and the interest he could have earned on his retirement fund is $5,000 (10% of $50,000). Therefore, his economic profit is $45,000 - $40,000 - $5,000 = $0.

Ben Quit His Job as an Economics Professor to Become