Wayne, a small business owner, had production expenses last year of $40,000. Revenues were $100,000. Wayne gave up a job that paid $60,000 to open his business. Wayne's economic profit last year was:

Question

Quizplus · Accepted Answer

Economic profit is calculated by subtracting both explicit (actual financial costs) and implicit costs (opportunity costs) from total revenues. Wayne's explicit costs are $40,000, and his implicit cost is the $60,000 job he gave up. So, his economic profit is $100,000 (revenue) - $40,000 (explicit costs) - $60,000 (implicit costs) = $0.

Wayne, a Small Business Owner, Had Production Expenses Last Year