Dr.Khan starts his own dental practice after quitting his $150,000 job at The Mall Dental Clinic.His revenues for the first year are $500,000.He paid $90,000 in rent for the dental office,$60,000 for his office manager's salary,$24,000 for the dental hygienist,$150,000 for insurance,and $6,000 for other miscellaneous costs.The normal profit from running his business is $20,000.Which of the following statements is true?

Question

Quizplus · Accepted Answer

To calculate economic profit, we subtract all explicit costs (such as rent, salaries, insurance, and other costs) and implicit costs (such as the normal profit from running the business) from the total revenue. 
Thus, Economic Profit = Total Revenue - Explicit Costs - Implicit Costs 
= $500,000 - ($90,000 + $60,000 + $24,000 + $150,000 + $6,000) - $20,000 
= $500,000 - $330,000 - $20,000 
= $150,000 - $20,000 
= $130,000 
Since the economic profit is positive but not equal to accounting profit, statement C is true.

DrKhan Starts His Own Dental Practice After Quitting His $150,000