Question

A business owner makes 50 items by hand in 40 hours. She could have earned $20 an hour working for someone else. Her total explicit costs are $200. If each item she makes sells for $15, her economic profit equals what?

Answer 1

Answer:

- $250

Explanation:

The economic profit calculation is presented below:

= Total revenues - explicit cost - implicit cost

where,  

Total revenues = Explicit revenue × implicit revenue

= $15 × 50 items

= $750

Explicit cost = $200

Implicit cost = $20 × 40 hours = $800

Now place these values in the formula above

So the value would be equal to

= $750 - $200 - $800

= - $250