Marcie quit her job as a preschool teacher, which paid an annual salary of $28,000, and became a street food vendor. She used $8,000 out of her savings account that paid a 4% annual interest rate to buy a street cart to sell food. In her first year of operations, she spent $10,000 on food and supplies (napkins, cups, plates, etc.) and earned total revenue of $45,000. Marcie's accounting profit is ______ and economic profit is ______.

Question

Quizplus · Accepted Answer

Marcie's accounting profit is the revenue earned minus the explicit costs incurred, so it is $45,000 - $10,000 = $35,000.
Her economic profit is the revenue earned minus both explicit and implicit costs. The implicit cost is the opportunity cost of quitting her job, which is the salary she would have earned. This is $28,000. She also gave up the interest she could have earned on her savings, which is $8,000 x 4% = $320. 
So her economic profit is $45,000 - $10,000 - $28,000 - $320 = $6,680.
Therefore, the correct answer is D.

Marcie Quit Her Job as a Preschool Teacher, Which Paid