Scenario 13-2
Zach withdrew $400,000 out of his personal savings account and used it to start his new cookie business.The bank account pays 3 percent interest per year.During the first year of his business,Zach sold 6,000 boxes of cookies for $2.50 per box.Also during the first year,the cookie business made monetary outlays of $9,000.You may assume that there is no opportunity cost to Zach's time.
-Refer to Scenario 13-2.Zach's economic profit for the year was

Question

Quizplus · Accepted Answer

Zach's economic profit is calculated by subtracting both explicit and implicit costs from total revenue. Total revenue is $15,000 (6,000 boxes * $2.50). Explicit costs are $9,000. Implicit costs include the foregone interest of $12,000 ($400,000 * 3%). Economic profit = $15,000 - $9,000 - $12,000 = -$6,000.

Scenario 13-2 Zach Withdrew $400,000 Out of His Personal Savings Account and Account