Question

George owns a dude ranch in Texas. He pays $32,000 per year in insurance, $408,000 in wages, and $23,000 in supplies. He forgoes $32,000 per year he could make as a police officer. His total revenue last year equaled $460,000. That means his economic _____ equaled _____. profit; $3,000 losses; $35,000 losses; $3,000 profit; $35,000

Answer 1

Answer:

Profit; $35,000

Explanation:

Given: Insurance paid= $ 32000.

          Wages paid= $408000.

         Paid for supplies= $23000.

         Opportunity cost= $32000

         Revenue= $460000.

Now, computing the economic profit.

Economic profit= $Revenue- explicit\ cost- Opportunity\ cost$

⇒ Economic profit= $460000- (32000+408000+23000)-32000$

⇒ Economic profit= $460000-463000-32000$

∴ Economic profit= $\ 35000$

Economic profit is the amount of difference between revenue received and explicit expense of the company, while calculating economic profit, we also deduct opportunity cost from revenue earned.