A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is ________ and owner's economic profit is ________.

Question

Quizplus · Accepted Answer

The accounting profit is calculated as revenue minus explicit costs, which is $60,000 - $40,000 = $20,000. The economic profit also considers the opportunity cost of not working elsewhere, which is $25,000. Therefore, the economic profit is $20,000 - $25,000 = -$5,000.

A Small Business Owner Earns $60,000 in Revenue Annually