Question

Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. Refer to Scenario 13-9. An economist would calculate the total cost for one photo frame to be

Answer 1

accounting profit = $25

Total cost = $15

Economic profit = $15

Step-by-step explanation:

given data

spends = $5

Implicit cost = $10 per hour

sell = $30

to find out

calculate the total cost for one photo frame

solution

first we calculate here accounting profit that is

accounting profit = Sale price - cost spent on materials

accounting profit = $30 - 5

accounting profit = $25

and

Total cost = Explicit cost + Implicit cost

Total cost = 5 + 10

Total cost = $15

and Economic profit will be

Economic profit = Accounting profit - implicit costs

Economic profit = $25 - $10

Economic profit = $15