Hannah is the owner of a party store.Last year,her total revenue was $145,000,her rent was $12,000,her labor costs were $65,000,and her overhead expenses were $15,000.If she could earn $53,000 working for another party store nearby,we know that her economic profit was

Question

Quizplus · Accepted Answer

To calculate economic profit, we need to subtract all explicit (out-of-pocket) costs as well as implicit (opportunity) costs from total revenue. 
Explicit Costs: 
Rent = $12,000 
Labor Costs = $65,000 
Overhead expenses = $15,000 
Total Explicit Costs = $12,000 + $65,000 + $15,000 = $92,000

Implicit Costs: 
The opportunity cost of owning the party store is the money that Hannah could have earned by working for another party store nearby, which is $53,000.

Total Costs (Explicit + Implicit) = $92,000 + $53,000 = $145,000 
Therefore, Economic Profit = Total Revenue - Total Costs 
Economic Profit = $145,000 - $145,000 = $0.00 
Therefore, the answer is D, $0.00.

Hannah Is the Owner of a Party Store