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Brad Adams owns Brad’s Baking business. In the previous year, Brad’s baking had the following statement...

Brad Adams owns Brad’s Baking business. In the previous year, Brad’s baking had the following statement of revenues and cost.

Revenues = $300,000

Supplies = $70,000

Utilities = $10,000

Employee salaries = $20,000

Brad’s salary = $30,000

Brad always has an option of closing his baking business and renting out his building for $60,000 per year. Also, Brad has a job offer from a chain baking business offering him a salary of $50,000 per year and a local baking store offering him a salary of $25,000 per year. Brad can only work one job at any time. What is Brad’s Baking economic profit?

A $200,000

B. $100,000

C. $90,000

D. $80,000

E. $75,000

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Answer #1

Economic profit = Revenue - Implicit cost - Explicit cost

= 300000 - 70000 - 10000 - 20000 - 30000 - 60000 - (50000-30000)

= 90000

option C is correct answer

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