Janelle owns a small hotel in San Francisco near Fisherman's Wharf. She pays $30,000 per year in insurance, $418,000 in wages, and $43,000 in supplies. She forgoes $30,000 per year she could make as a police officer. Her total revenue last year equaled $560,000. That means her economic _____ equaled _____.

Question

Quizplus · Accepted Answer

To calculate the economic profit, we need to subtract all the explicit and implicit costs from the revenue. 
Explicit costs: insurance + wages + supplies = $491,000 
Implicit costs: forgone salary = $30,000 
Total costs: explicit + implicit = $521,000 
Revenue: $560,000

Economic profit = Revenue - Total costs = $560,000 - $521,000 = $39,000

Therefore, the economic profit equaled $39,000, and the best choice is D.

Janelle Owns a Small Hotel in San Francisco near Fisherman's