Question

Eymi's business makes friendship bracelets and earns $10,000 in revenues, has explicit costs of $7,000, and has implicit costs of $5,000. Thus, for Eymi, her business has an accounting profit of

A. $2,000
B. −$2,000
C. $5,000
D. $3,000

Answer 1

Accounting profit is calculated as total revenues minus explicit costs. In this case, Eymi's business would have an accounting profit of $3,000, as implicit costs are not considered for this calculation.

Step-by-step explanation:

The student has asked about how to calculate accounting profit for Eymi's business, which has $10,000 in revenues, $7,000 in explicit costs, and $5,000 in implicit costs. Accounting profit is calculated by subtracting explicit costs from total revenues. Therefore, the accounting profit would be calculated as follows: $10,000 (total revenues) - $7,000 (explicit costs) = $3,000. Implicit costs are not considered when calculating accounting profit; they are considered when calculating economic profit.