Question

A business owner makes 50 items by hand in 40 hours. She could have earned $20 an hour working for someone else. Her total explicit costs are $200. If each item she makes sells for $15, her economic profit equals what?

Answer 1

Answer:

- $250

Explanation:

The economic profit calculation is presented below:

= Total revenues - explicit cost - implicit cost

where,  

Total revenues = Explicit revenue × implicit revenue

= $15 × 50 items

= $750

Explicit cost = $200

Implicit cost = $20 × 40 hours = $800

Now place these values in the formula above

So the value would be equal to

= $750 - $200 - $800

= - $250

Answer 2

The economic loss of the business owner equals $250.

Economic profit is basically the profit from activities of production of goods and services.

• The formulae in this context is Total revenues - Explicit cost - implicit cost.

Economic profit = Total revenues - Explicit cost -  Implicit cos

Economic profit = (Explicit revenue*implicit revenue) - Explicit cost -  Implicit cost

Economic profit = ($15 * 50 items) - $200 - ( $20 * 40 hour)

Economic profit = $750 - $200 -  $800

Economic profit = -$250

Therefore, the economic loss of the business owner equals $250.

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