Question

Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda's accounting profit is _____________ while her economic profit is ______________.a. $700;$400b. $300;$100c. $300 negative $100d. $1000 negative $1100

Answer 1

Answer: Option C : $300; Negative $100

Linda's accounting profit = $300

Economic Profit= -$100

Explanation:

Total money generated = cost price x number of units = $100 x 10 = $1000

Profit = Total revenue generated - Cost of production = $1000 - $700 = $300

Linda's accounting profit = $300

Economic Profit = $300 - ($20 x 20hours)

Economic Profit= $300 - $400 = -$100