Question

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp Multiple Choice has lower implicit costs, including a normal profit, than its explicit costs. is earning a normal profit but not an economic profit. is earning an economic profit. is suffering an economic loss, when implicit costs are considered.

Answer 1

is earning an economic profit.

Step-by-step explanation:

implicit costs = $50,000 + $80,000 + $6,000 = $136,000

revenues = $380,000

explicit costs = $22,000 + $120,000 + $8,000 = $150,000

economic profit = $380,000 - $150,000 - $136,000 = $94,000