Question

Manisha could work for another firm making​ $10,000 per​ month, but she decides to open her own gourmet cheese store and pay herself​ $2,000 per month. In her first month of​ operations, she spends​ $6,000 on​ cheese, $1,000 on other​ items, and​ $2,500 on rent. She had a great opening​ month, and brought in revenues of​ $14,500. What are​ Manisha's economic​ profits

Answer 1

Answer:

Manisha's economic profits are - $5,000.

Explanation:

Manisha could work for another firm making​ $10,000 per​ month, but she decides to open her gourmet cheese store and pay herself​ $2,000 per month.

In her first month of​ operations, she spends​ $6,000 on​ cheese, $1,000 on other​ items, and​ $2,500 on rent.

She had a great opening​ month and brought in revenues of​ $14,500.

The economic profits

= Total revenue - (Implicit costs + explicit costs)

= $14,500 - ($10,000 + $6,000 + $1,000 + $2,500)

= $14,500 - $19,500

= - $5,000