Ralph owns a small pizza restaurant,where he works full-time in the kitchen.His total revenue last year was $100,000,and his rent was $3,000 per month.He pays his one employee $2,000 per month,and the cost of ingredients and overhead averages $500 per month.Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby.His accountant,who does not consider implicit costs,would tell him that profit for the year was:

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The accountant calculates profit by subtracting explicit costs from total revenue. Ralph's explicit costs are rent ($36,000), employee salary ($24,000), and ingredients/overhead ($6,000), totaling $66,000. Subtracting this from $100,000 revenue gives a profit of $34,000.

Ralph Owns a Small Pizza Restaurant,where He Works Full-Time in the Kitchen.His