Question

Consider the following scenario when answering the following two questions. Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues and has $15,000 in explicit costs and $25,000 in implicit costs. If Charlie’s Churros’ profits are computed by the method that accountants use, then they are:

Answer 1

Economic profit = 0

Step-by-step explanation:

GIVEN DATA

Total revenue = $40,000

explicit costs = $15,000

implicit costs = $25,000

SOLUTION

we know here Economic profit is express as

Economic profit is = Total revenue - ( implicit cost + explicit cost ) ................1

put here value

Economic profit = $40,000 - ( $25,000 + $15,000)

so

Economic profit = $40,000 - $40,000

so that

Economic profit = 0