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.
Refer to the information given above.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)-$1,000;-$1,000

Question

Quizplus · Accepted Answer

Explicit costs are rent,advertising and equipment: 12,000 + 1,000 + 3,000 = 16,000,so accounting profit is revenue of 50,000 - 16,000 = 34,000.Pat's implicit cost is Pat's former salary of $35,000.Pat's accounting profit is $1,000 less than Pat's old salary.

Pat Used to Work as an Aerobics Instructor at the Local