Question

Carmela’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Carmela’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Carmela’s Churros’ economic profits are:_______a. $40,000.b. $15,000.c. $80,000.d. $25,000.e. $0.

Answer 1

Answer:

e. $0

Explanation:

The economic profits of Carmela’s Churros can be determined through following mentioned equation.

Economic profit=Revenues-(explicit costs+implicit costs)

In the given question

Revenues= $40,000

explicit costs=$15,000

implicit costs=$25,000

Economic profits=$40,000-($15,000+$25,000)

                          =$0

So based on the above calculation, the answer is e. $0