Question

Jennifer owns a pig farm near​ Salina, Kansas. Last year she earned​ $39,000 in total revenue while incurring​ $38,000 in explicit costs. She could have earned​ $27,000 as a teacher in Salina. These are all her revenue and costs. Therefore Jennifer earned an__________

Answer 1

Jennifer earned an Accounting profit of $1,000

and Economic loss of $26,000

Step-by-step explanation:

Data provided in the question:

Total revenue earned by Jennifer = $39,000

Explicit costs incurred = $38,000

Amount she could have earned as a teacher = $27,000

Now,

The Accounting profit for Jennifer

= Total revenue earned - Explicit costs incurred

= $39,000 - $38,000

= $1,000

The Economic profit for Jennifer

= Total revenue earned - Explicit costs incurred - Amount she could have earned as a teacher

= $39,000 - $38,000 - $27,000

= - $26,000 [Here, the negative sign means a loss]

Therefore,

Jennifer earned an Accounting profit of $1,000

and Economic loss of $26,000