Question

Karen, a programmer, eamed $40,000 in 2010, but in 2011, she opened a body board manufacturing business. After one year, she submited the data on the right to her accountant Karen's explicit costs areand implicit costs are O A $62,000, $65,700 O B. $63,700, $43,800 O c. $43,600. S63.700 O D. $43,600. 565,700 OE. 965,700, 562.000 Karen's economic profit is O A $20,000 O B. $176,400 Question Facts i She stopped renting out her cottage for $5,500 a year and used it as her factory. The market value of the cottage increased from $92,000 to $94,000 She spent $25,000 on materials, phone, uilities She leased machines for $7,000 a year She paid $10,000 in wages. v She used $5,000 from her savings account, which eto. pays 4 percent a year interest i She borrowed $20,000 at 8 percent a year from с. $112,700 O D. $107,300 ΟΕ. $156.300 the bank She sold $220,000 worth of body boards vil Nomal profit is $20,000 a year

Answer 1

- C is correct

Explicit cost= 25000+7000+10000+ 0.08*20000 = 43600

Implicit cost= 40000 + 5500 - (94000-92000) + 0.04*5000+ 20000= 63700

- C is correct

Economic profit= revenue - total cost

= 220000 - 63700 - 43600= 112700