Question

Ryan quit a job with a daily salary and opened a business. On a daily basis, the total revenue of the business is $200, and the explicit costs of the business are $120. If ryan has zero economic profits, what must be the value of ryan’s implicit costs?.

Answer 1

Ryan's implicit costs are $80 per day, which is derived by subtracting his daily explicit costs from his total daily revenue, under the condition that his economic profit is zero.

Step-by-step explanation:

The economic profit of a business is calculated by subtracting both explicit and implicit costs from total revenues. In this scenario, Ryan has zero economic profits, which means his total revenues ($200 per day) are equal to the sum of his explicit costs ($120 per day) and implicit costs. To find the value of Ryan's implicit costs, we follow the formula:

Economic profit = Total revenues - Explicit costs - Implicit costs

Since Ryan's economic profit is zero, we can rearrange the formula to solve for implicit costs:

0 = $200 - $120 - Implicit costs

Implicit costs = $200 - $120

Implicit costs = $80

Therefore, the value of Ryan's implicit costs must be $80 per day.