A business owner makes 1000 items a day.Each day she spends 8 hours producing those items.If hired,elsewhere she could have earned $250 an hour.The item sells for $15 each.Production occurs seven days a week.If the explicit costs total $150,000 per month,what is her economic profit?

Question

​A business owner makes 1000 items a day.Each day she spends 8 hours producing those items.If hired,elsewhere she could have earned $250 an hour.The item sells for $15 each.Production occurs seven days a week.If the explicit costs total $150,000 per month,what is her economic profit?

Quizplus · Accepted Answer

First, let's calculate the total revenue generated in a month: 
1000 items/day x $15/item x 7 days/week x 4 weeks/month = $420,000 
Next, let's calculate the total opportunity cost of producing those items: 
8 hours/day x 7 days/week x 4 weeks/month x $250/hour = $56,000 
Now, let's subtract the explicit costs from the total revenue: 
$420,000 - $150,000 = $270,000 
Finally, let's subtract the opportunity cost from the revenue: 
$270,000 - $56,000 = $214,000 
This is the economic profit, so the answer is D, $240,000 rounded to the nearest thousand.

​A Business Owner Makes 1000 Items a Day

A Business Owner Makes 1000 Items a Day