a person starts his own business. he quits his $75,000 a year job. expenses include wages and salaries of $100,000 a year, utilities of $5,000 a year, and materials of $40,000 and equipment of $50,000. if revenues are $200,000, his accounting profit is and his economic profit is $80,000; $5,000 - $70,000; - $70,000 $5,000; - $70,000 $5,000; $5,000

The accounting profit of the business is $5,000 and the economic profit is -$70,000. The accounting profit is calculated as the total revenues of the business minus the explicit costs.

How to calculate accounting profit ?

The accounting profit is calculated as the total revenues of the business minus the explicit costs, which in this case are $100,000 for wages and salaries, $5,000 for utilities, $40,000 for materials, and $50,000 for equipment. The accounting profit is therefore calculated as:

Accounting profit = Revenues - Explicit costs

= $200,000 - $100,000 - $5,000 - $40,000 - $50,000

= $5,000

The economic profit is calculated as the total revenues of the business minus both the explicit costs and the implicit costs. The implicit costs in this case are the opportunity cost of the owner's time and resources, which is the $75,000 salary that the owner gave up by quitting his job to start the business. The economic profit is therefore calculated as:

Economic profit = Revenues - Explicit costs - Implicit costs

= $200,000 - $100,000 - $5,000 - $40,000 - $50,000 - $75,000

= -$70,000

To learn more about economic profit refer :

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