A business owner makes 1000 items a day.Each day he/she contributes 8 hours to produce those items.If hired,elsewhere he/she could have earned $250 an hour.The item sells for $15 each.Production does not stop during weekends.If the explicit costs total $150,000 for 30 days,the economic profit for the month equals:

Question

Quizplus · Accepted Answer

The total revenue from 30 days of production is:

1000 * 15 * 30 = $450,000

The total explicit costs are given as $150,000.

To calculate the implicit costs, we need to find out how much the owner could have earned if they worked elsewhere for 8 hours a day, for 30 days.

8 hours * $250/hour = $2000 per day

$2000 * 30 days = $60,000

So, the total economic costs are:

$150,000 + $60,000 = $210,000

The economic profit is therefore:

$450,000 - $210,000 = $240,000

Therefore, the best choice is D.

A Business Owner Makes 1000 Items a Day