Question

A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. The firm's factory sits on land owned by the firm that could be rented out for $30,000 per year. What was the firm's economic profit last year?

Answer 1

Answer:

$80,000

Explanation:

Given that the sales revenue = $1000000

Labor= $600,000

Capital= $150,000

Materials =$200,000

Total expenditure= $(600,000+150,000+200,000)=$950,000

Profit=$1000,000-$950,000=$50,000

Income from renting the space for a year=$30,000

Total economic profit last year= $50,000+$30,000 =$80,000