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17 November, 10:58

Suppose you own a small business. last month, your total revenue was $6,000. in addition, you paid: $1,000 in monthly rent for office space. $200 in monthly rent for equipment. $3,000 to your workers in wages for the month. $1,000 for the supplies you used that month. if you correctly determine that your economic profit last month was negative $200, then it must be true that:

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  1. 17 November, 14:42
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    Profit is simply the difference of revenue and total cost.

    Profit = Revenue - Total Cost

    where total cost is the sum of explicit cost and implicit cost

    Profit = Revenue - (Explicit cost + Implicit cost)

    The explicit cost is:

    Explicit cost = 1000 + 200 + 3000 + 1000 = $5,200

    So finding for implicit cost:

    -200 = 6000 - (5,200 + Implicit cost)

    Implicit cost = $1,000

    Answer:

    Your implicit costs are 1,000
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