Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is ________, and Pat's economic profit is ________.
A)$50,000; $15,000
B)$34,000; −$1,000
C)$34,000; $15,000
D)$15,000; −$1,000

Question

Quizplus · Accepted Answer

Accounting profit equals total revenue minus explicit costs. Here, $50,000 − $12,000 - $1,000 − $3,000 = $34,000. Economic profit equals total revenue minus the sum of both explicit and implicit costs. Here, $50,000 − $12,000 − $1,000 − $3,000 − $35,000 = −$1,000

Pat Used to Work as an Aerobics Instructor at the Local