Manisha could work for another firm making $10,000 per month, but she decides to open her own gourmet cheese store and pay herself $2,000 per month. In her first month of operations, she spends $6,000 on cheese, $1,000 on other items, and $2,500 on rent. She had a great opening month, and brought in revenues of $14,500. What are Manisha's economic profits

Question

Business

Josephine Mcdonald

13 June, 14:58

Manisha could work for another firm making $10,000 per month, but she decides to open her own gourmet cheese store and pay herself $2,000 per month. In her first month of operations, she spends $6,000 on cheese, $1,000 on other items, and $2,500 on rent. She had a great opening month, and brought in revenues of $14,500. What are Manisha's economic profits

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Answers (1)

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Antony Anderson · Answer 1

Manisha's economic profits are - $5,000.

Explanation:

Manisha could work for another firm making $10,000 per month, but she decides to open her gourmet cheese store and pay herself $2,000 per month.

In her first month of operations, she spends $6,000 on cheese, $1,000 on other items, and $2,500 on rent.

She had a great opening month and brought in revenues of $14,500.

The economic profits

= Total revenue - (Implicit costs + explicit costs)

= $14,500 - ($10,000 + $6,000 + $1,000 + $2,500)

= $14,500 - $19,500

= - $5,000