The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5000 and the firm's explicit costs are $3500. From this we know that this firm's

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AAccounting profit is calculated by subtracting explicit costs from total revenue, which is $5000 - $3500 = $1500. Economic profit also considers implicit costs, including the opportunity cost of capital. Here, the opportunity cost of the $10,000 capital at a 10% interest rate is $1000 (10% of $10,000). Therefore, the economic profit would be the accounting profit minus the opportunity cost of the capital, which is not one of the provided options.

The Economy's Current Rate of Interest Is 10 Percent and a Firm