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9 September, 18:15

A business owner makes 1000 items a day. Each day she spends 8 hours producing those items. If hired, elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her economic profit

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  1. 9 September, 18:43
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    Economic profit = $214,000

    Explanation:

    Giving the following information:

    Business:

    Units = 28,000 a month

    Hours = 224 hours

    Total cost = 150,000 a month

    Selling price per unit = $15

    Other work:

    Income = $250 an hour

    Economic profit includes the opportunity cost.

    Economic profit = 28,000*15 - 150,000 - 250*224

    Economic profit = $214,000
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