Answer:
a) Her economic profit is $240,000 per month
b) Per week, the firm:
TVC: $5,000
TFC: $14,250
TC: $19,250
c) Her accounting profit is $300,000
Explanation:
a)
Assume a 30-day per month basis for calculation.
Her revenue for a month = Number of items made per day * 30 * Selling price per unit = 1,000 * 30 * 15 = $450,000
Her explicit cost per month is given at $150,000
Her implicit cost ( opportunity cost) per month = Her salary could be earned if she works elsewhere = Pay rate per hour * Number of hour working per day * 30 = 250 * 8 * 30 = $60,000
=> Her economic profit per month = Her revenue for a month - Her explicit cost per month - Her implicit cost ( opportunity cost) per month = $450,000 - $150,000 - $60,000 = $240,000.
b)
Per week, the firm TVC, TFC and TC is calculated as below:
Weekly TVC = Raw material cost = Raw material cost per unit * Unit produced per one week = 10 * 500 = $5,000;
Weekly TFC = Weekly factory rent + Weekly employee costs = 2,250 + Number of employees hired * Cost of hourly wage * Number of working hours per week = 2,250 + 20 * 15 * 40 = $14,250;
Weekly TC = Weekly TVC + Weekly TFC = 5,000 + 14,250 = $19,250.
c)
Assume a 30-day per month basis for calculation.
Her revenue for a month = Number of items made per day * 30 * Selling price per unit = 1,000 * 30 * 15 = $450,000
Her explicit cost per month is given at $150,000
=> Her accounting profit per month = Her revenue for a month - Her explicit cost per month= $450,000 - $150,000 = $300,000.
