A business owner makes 50 items a day.She spends 8 hours in producing those items.If hired elsewhere she could have earned $10 an hour.The item sells for $10 each.Production occurs seven days a week.If the explicit costs total $10,000 a month the economic profit for the month equals:

Question

​A business owner makes 50 items a day.She spends 8 hours in producing those items.If hired elsewhere she could have earned $10 an hour.The item sells for $10 each.Production occurs seven days a week.If the explicit costs total $10,000 a month the economic profit for the month equals:

Quizplus · Accepted Answer

The business owner makes $15,000 in revenue (50 items/day * $10/item * 30 days). The explicit costs are $10,000. The implicit cost (opportunity cost of her time) is $2,400 (8 hours/day * $10/hour * 30 days). Economic profit = Total Revenue - Explicit Costs - Implicit Costs = $15,000 - $10,000 - $2,400 = $2,600.

​A Business Owner Makes 50 Items a Day

A Business Owner Makes 50 Items a Day