Question

Question 1 1 pts A business owner makes 50 items by hand in 10 hours. She could have earned $12 an hour working for someone else. If each item sells for $5 and the explicit costs total $80, economic profit for 50 items is: O $50 O $170 $100 O $250 Question 2 1 pts A business owner makes 50 items by hand in 10 hours. She could have earned $12 an hour working for someone else. If each item sells for $6 and the explicit costs total $80, accounting profit for 50 items is: O $300 $220 $236 $100

Answer 1

Economic profit = Total revenue - ( explicit+ implicit cost)

1. Economic profit = (5*50) - ( 80+120)

= 250 - 200

= $50

Implicit cost = 12*10hours

= $120

2. Accounting profit = total revenue - explicit cost

= (6*50) - 80

= 300-80

= $220

3. If marginal cost is below average cost, then average cost decreases as output increases.

4. Marginal cost= $3

5. Average variable cost = $7

6. Average total cost = $12