Question

34 Question ( point) Although Goldman Sachs paid Heather $100000.00 per year, she was not satisfied with her job She had loved going white water rafting and skiing with her family in Utah since she was a little girl. So last year, she decided to open her own business: Family Adventures. During the summer, she takes familles on different whlte-water trips, and in the winter, she leads clients on skiing trips. To start her business, Heather borrowed $100,000 from a bank and used $1 10000.00 of her savings. Her savings earned 10% interest. At the end of the year, she wanted to know whether her new business venture was worthwhile. The table below lists her total revenue and itemized costs for Family Adventures. Item I Dollar Value $300000.00 $140000.00 $25.000.00 $10,000.00 $5.000.00 Total revenue oyee wages ton her business office s on bank loan tility and gas expenses 1st attempt Part 1 (0.5 point) Q SeeHint Family Adventures' accounting profit was$ Part 2 (0.5 point) Q SeeHint Family Adventures' economic profit was $ If the economic profit is less than zero, be sure to include the sign.) K34/50> COMPLFTED SUBMIT ANSWER

Answer 1

Part 1-

Accounting Profit=Total Revenue-Total Explicit Cost

=$300000-($140000+$25000+$10000+$5000)

=$300000-$180000

=$120000

Part 2-

Economic Profit=Total Revenue-Total Explicit Cost-Total Implicit Cost

or

=Accounting Profit-Total Implicit Cost

=$120000-(10% of ($100000+$110000))+$100000)

=$120000-$121000

=-$1000

Note-

Explicit Cost-Input Costs that require an outlay of money is called by firm is called Explicit Cost.

Implicit Cost-Input Cost that do not require outlay of money by firm is called is Implicit Cost.

Part C-

True

Diagram-

mC ATC 0