You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at a computer software firm that paid $40,000 a year.Last year,your economic profits were

Question

Quizplus · Accepted Answer

Economic profits are calculated by subtracting both explicit (actual financial costs) and implicit costs (opportunity costs, such as foregone salary) from total revenues. Here, explicit costs are $10,000, and the implicit cost (foregone salary) is $40,000. Subtracting these from the total revenues of $75,000 gives an economic profit of $25,000.

You Are the Owner and Only Employee of a Company