Question

Lisa quit her $20000-per-year job to start her own economics consulting firm. At the end of her first year of operation, her total revenues were $150000. Her total explicit costs were $35000. What was her economic profit for the year? (Give response as a number, no commas, decimals, dollar signs, or otherwise.)

Answer 1

Answer:

Economic profit for the year is

Explanation:

The accounting profit will be Revenue - expenses (150,000-35,000) $ 115,000. However this problem requires us to calculate economic profit. Economic profit is different from accounting profit. While calculating it opportunity costs also become part of expenses as implicit costs. Detail calculation is given below.

Economic profit = 150,000 -35,000-20,000 = $ 95,000