The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $48,000Annual lease on building = $20,000Annual revenue from operations = $280,000Payments to workers = $118,000Utilities (electricity, water, disposal)costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's economic profit is

Question

Quizplus · Accepted Answer

Economic profit is calculated by subtracting both explicit and implicit costs from total revenue. Here, explicit costs include payments to workers ($118,000), lease on building ($20,000), and utilities ($8,000), totaling $146,000. Implicit costs include the entrepreneur's potential earnings as a salaried worker ($48,000), forgone interest on personal funds ($6,000), and the value of the entrepreneur's talent in the next best activity ($80,000), totaling $134,000. Adding both explicit and implicit costs gives $280,000, which, when subtracted from the annual revenue ($280,000), results in an economic profit of $0.

The Following Is Cost Information for the Creamy Crisp Donut