Question

ane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane’s economic profit from her first year in her own practice is a. -$39,000. b. $124,000. c. $163,000. d. $184,000.

Answer 1

The correct answer is A.

Step-by-step explanation:

Giving the following information:

Salary= $223,000 per year

Business:

Revenue= $347,000

Costs= $163,000

Economic profit incorporates the opportunity cost of not choosing other options. In this case, the salary on the law firm.

Income= revenue - costs - opportunity cost

Income= 374,000 - 163,000 - 223,000

Income= -$39,000