Question

Assume that you own a sole proprietorship. Your first year earnings were $75,000, and your explicit costs were $55,000. If you could have worked at another establishment and earned $25,000, which of the following is true

a. Your firms earned an economic profit of $20,000

b. Your firms total implicit costs were $80,000

c. Your firm substained an economic loss of $5,000

d. Your firms total costs are $100,000

Answer 1

Answer:

C

Explanation:

Economic profit = total revenue - total cost where total cost = explicit cost + implicit cost

economic profit = $ 75 000 - $ ( 55000 + 25000) = - $ 5000

which means the firm sustained an economic loss of $ 5000