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The following is cost information for the Creamy Crisp Donut Company
The following is cost information for the Creamy Crisp Donut Company.
Entrepreneur's potential earnings as a salaried worker = $55,000 Annual lease on building = $23,000 Annual revenue from operations = $320,000 Payments to workers = $130,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's economic profit is Multiple Choice O $161,000. O $18.000. O $302,000. O $169,000.
Expert Solution
Computation of Creamy Crisp's Economic Profit:
Economic Profit = Total Revenue - Explicit Costs - Implicit Costs
Here,
Total Revenue = Annual revenue from operations = $320,000
Explicit Costs = 23000+130000+8000 = $161,000
Implicit Costs = 55000+80000+6000 = $141,000
Economic Profit = $320,000-$161,000 - $141,000 = $18,000
So, the correct option is 2nd "$18,000".
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