Jada left a job that paid $40,000 per year. At the end of her first year in business, her revenues summed to $90,000, and her explicit costs were $50,000. Also, in order to fund her business startup, Jada cashed in a $20,000 certificate of deposit that was providing an annual yield of 5%. Ceteris paribus, Jada's economic profit is

Question

Quizplus · Accepted Answer

Jada's economic profit is calculated by subtracting both explicit and implicit costs from her total revenue. Her explicit costs are $50,000, and her implicit costs include the $40,000 salary she gave up and the $1,000 interest she lost from cashing in the certificate of deposit. Therefore, her total costs are $91,000 ($50,000 + $40,000 + $1,000), leading to an economic profit of $90,000 - $91,000 = -$1,000.

Jada Left a Job That Paid $40,000 Per Year