Charlie's Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie's Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie's Churros' economic profits are:

Question

Quizplus · Accepted Answer

Economic profits are calculated by subtracting both explicit and implicit costs from revenues. Therefore, Charlie's Churros' economic profits are $40,000 - $15,000 - $25,000 = $0. The best choice for the firm is to continue operating in the short run, since it is covering its explicit costs and earning zero economic profits.

Charlie's Churros Is a Perfectly Competitive Firm That Sells Desserts