Until recently,Rosemarie worked as an accountant,earning $30 000 annually.Then,she inherited a piece of commercial real estate that had been renting for $12 000 annually.Rosemarie decided to leave her job and operate a Peruvian restaurant in the space she inherited.At the end of the first year,her books showed total revenues of $260 000 and total costs of $230 000 for food,utilities,cooks,and other supplies.Her economic profit at the end of 1 year is:

Question

Quizplus · Accepted Answer

Economic profit considers both explicit and implicit costs. Rosemarie gave up her $30,000 salary and $12,000 rental income, totaling $42,000 in opportunity costs. Her accounting profit is $30,000 ($260,000 revenue - $230,000 costs). Subtracting the $42,000 opportunity cost from the $30,000 accounting profit results in an economic profit of -$12,000.

Until Recently,Rosemarie Worked as an Accountant,earning $30 000 Annually