Question

Eva runs a hot dog cart at the sports stadium. Eva has no skills, no job experience, and no alternative employment. Entrepreneurs in the hot dog cart business earn $10,000 a year. Eva pays the rent of $1,500 a year, and her total revenue is $24,000 a year She borrowed $900 at 15 percent a year to buy equipment. At the end of one year, Eva was offered $500 for her business and all its equipment. Eva's explicit costs are $ 1,635 Eva's implicit costs are $ 10,400 Eva's economic profit in the first year is 1 dollars. >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.

Answer 1

Explicit costs = rent+interest = 1500 + 900*15% = 1635

Implicit costs = 10000+(900-500)= 10400