Question

Jaynet spends $30,000 per year on painting supplies and storage space. She recently received two job...

Jaynet spends $30,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm – one offer was for $85,000 per year, and the other was for $115,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 20 paintings per year at a price of $8,000 each:

What are her economic profits?

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Answer #1

Accounting profit does not take into account the opportunity cost. Its total cost includes only an explicit cost.

Accounting profit = Total revenue - Total cost

= P.Q - $ 30,000

= $ 8,000 X 20 - $ 30,000 = $130,000

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