Question

Raj opens up a lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same two hours, he could have mowed his neighbor's lawn for $40. Raj has accounting profit of _____ and an economic profit of _____. Select one: a. $50, $10. b. $90, $50. c. $50, $90. d. $10, $50.

Answer 1

Answer:

a. $50, $10

Explanation:

The accounting result would be explicit income and expenses:

60 sales and 10 cost of the ingridients = 50 dollar gain

While the economic result will also consider implicit cost. Which is the opportunity cost. This is the amount of revenue that could be generated for the factor in other alternative.

In this case we have a 50 dollar gain less the 40 dollar we coudl have earned doing the other job the economic gain is 10 dollars