If Rocco's Rib Joint took in $35 000 in revenue last week and had out-of-pocket expenses of $31 500, which of the following best describes Rocco's profits last week?
A) Rocco really didn't make any profit since he needs to put the difference between revenue and out-of-pocket expenses back into the firm.
B) Rocco made an economic profit of $3500.
C) It is not clear whether Rocco earned any profit last week because it depends on the magnitude of the implicit costs.
D) Rocco did not earn an economic profit.

Question

Quizplus · Accepted Answer

Profit calculation must consider both explicit (out-of-pocket) and implicit costs. The difference between revenue and explicit costs alone does not determine profit without considering implicit costs, such as opportunity costs.

If Rocco's Rib Joint Took in $35 000 in Revenue