Consider the following scenario when answering the following two questions.
Charlie's Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie's Churros currently is taking in $40,000 in revenues and has $15,000 in explicit costs and $25,000 in implicit costs.
-Charlie's Churros' economic profits are:

Question

Quizplus · Accepted Answer

Economic profit is the difference between total revenue and total cost (including both explicit and implicit costs). In this case, Charlie's Churros has explicit costs of $15,000 and implicit costs of $25,000, and total revenue of $40,000. Therefore, the economic profit can be calculated as: $40,000 - $15,000 - $25,000 = $0.

Answer: Charlie's Churros should continue operating in the short run because it is earning enough revenue to cover its explicit costs. However, it is not earning any economic profit, which may not be sustainable in the long run. Charlie's Churros may need to consider adjusting its prices or costs to increase revenue and profitability.

Consider the Following Scenario When Answering the Following Two Questions