Question

Q: Lisa sells 10 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $70. In addition, it took her 2 hours to make the ketchup and to do so she took time off from a job that paid her $10 per hour. Lisa's accounting profit is ............ while her economic profit is ..............

Answer 1

Answer:

Accounting Profit = $100

Economic profit = $80

Explanation:

Given that

Sales = 10

Cost = $10

The calculation of accounting profit and economic profit is shown below:-

Accounting Profit = Sales × Costs

= 10 × $10

= $100

For calculating accounting profit we simply multiply sales with costs.

Economic profit = Accounting profit - Opportunity cost

= $100 - 2 × $10

= $80

For calculating the economic profit we simply deduct the opportunity cost from accounting profit.