Question

A firm has explicit costs of $100,000 and implicit costs of $30,000, and generates $150,000 in revenue. How much revenue does it need to have a normal profit

Answer 1

$130,000

Step-by-step explanation:

Normal profit occurs when revenues equal explicit and implicit costs.

total revenue = explicit cost + implicit cost

$100,000 + $30,000 = $130,000

Answer 2

above $130,000

Step-by-step explanation:

Implicit cost is the opportunity cost that is incurred from the use of a company's resources, while explicit cost are those incurred in the normal running of the business. For example wages, utility payment, and raw material cost.

Total cost = Explicit cost + Implicit Cost

Total cost = $100,000 + $30,000

Total Cost = $130,000

Profit = Revenue - Total cost

So if profit is 0

0 = Revenue - $130,000

Revenue = $130,000

Therefore to get a normal profit that is above 0, the revenue should be above $130,000