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Use the following scenario to answer the following questions: Babak owns a sports practice facility called Boston Batting Cages in Boston, Massachusetts. During the first year of operation, Boston Batting Cages incurred many costs. In that year, Babak spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Babak took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. If Boston Batting Cages received $80,000 in revenues, what were the economics profits

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Answer:

$20,500

Step-by-step explanation:

Economic profit is the difference between the total revenue generated and the total explicit (direct) and implicit (Indirect cost ) incurred

Total revenue - (explicit cost + implicit cost )

Revenue 80,000

Explicit cost

Labor 5000

maintenance 2000

Electricity 1000

Total (8000)

Implicit cost

loan revenue forgone 1500

Previous earning 50000

Total (51,500)

Economic profit 20,500

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