Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that:a. the firm is incurring an economic loss.

b. implicit costs are $25,000.

c. the total economic costs are $100,000.

d. the individual is earning an economic profit of $25,000.

Question

Business

Dallas Craig

21 September, 10:23

Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that:a. the firm is incurring an economic loss.

b. implicit costs are $25,000.

c. the total economic costs are $100,000.

d. the individual is earning an economic profit of $25,000.

+4

Answers (1)

Know the Answer?

Raelynn Wu · Answer 1

a. the firm is incurring an economic loss.

Explanation:

The computation of the economic profit is shown below:

= Total revenues - total cost

where,

Total cost would be

= explicit cost + implicit cost

= $75,000 + $30,000

= $105,000

The implicit cost reflects the opportunity cost i. e $30,000

So, the economic loss would be

= $105,000 - $100,000

= $5,000

Hence, there is an economic loss of $5,000