Lauren is the owner of a bakery.Last year,her total revenue was $145,000,her rent was $12,000,her labor costs were $65,000,and her overhead expenses were $15,000.If she could earn $53,000 working for another bakery nearby,we know that her economic profit was:

Question

Quizplus · Accepted Answer

Economic profit is the difference between total revenue and total opportunity costs (explicit and implicit costs). In this case, Lauren's explicit costs were rent, labor costs, and overhead expenses, which add up to $92,000. If she could earn $53,000 working for another bakery, then her total opportunity cost is $92,000 + $53,000 = $145,000. This means that her total revenue of $145,000 was just enough to cover all her costs and give her a normal profit of zero. Therefore, her economic profit was $0.00.

Lauren Is the Owner of a Bakery