George owns a dude ranch in Alberta.He pays $32 000 per year in insurance,$408 000 in wages,and $23 000 in supplies.He forgoes $32 000 per year he could make as a police officer.His total revenue last year equalled $460 000.That means his economic _____ equalled _____.

Question

Quizplus · Accepted Answer

To calculate economic profit, we must subtract all explicit and implicit costs from total revenue. 
Explicit costs:
Insurance = $32,000
Wages = $408,000
Supplies = $23,000
Total explicit costs = $463,000

Implicit costs:
Opportunity cost of George's salary ($32,000)

Total costs = explicit costs + implicit costs
Total costs = $495,000

Economic profit = total revenue - total costs
Economic profit = $460,000 - $495,000
Economic profit = -$35,000

Since the economic profit is negative, it means that George incurred losses of $35,000. Therefore, the best choice is C.

George Owns a Dude Ranch in Alberta