Question

Situation 22-4 Joe is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. During the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year. Refer to Situation 22-4. What are Joe's economic profits

Answer 1

Answer:

Economic profit= $25,000

Explanation:

Giving the following information:

Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers.

Job offer= $50,000 per year

The economic profit takes into account the opportunity cost of other options.

Economic profit= 200,000 - 125,000 - 50,000

Economic profit= $25,000