A firm has $350 million in revenues and explicit costs of $150 million.If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year,the firm's economic profit is:

Question

Quizplus · Accepted Answer

The economic profit can be calculated as:
Economic profit = Total revenue - Explicit costs - Implicit costs
where Implicit costs = Opportunity cost of using owners' capital = $150 million * 10% = $15 million
Substituting the values, we get:
Economic profit = $350 million - $150 million - $15 million = $185 million
Therefore, the answer is choice C, $185 million.

A Firm Has $350 Million in Revenues and Explicit Costs