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23 June, 17:12

A young Thomas Edison produces and sells 20 light bulbs a week in his dorm room. The parts for each light bulb cost $2.00. He sells each light bulb for $5.00. General Electric offers Thomas an executive job that pays $50.00 a week. Thomas's weekly economic profit from making light bulbs is equal to:

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  1. 23 June, 19:29
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    Economic profit = $10

    Explanation:

    given data

    sells = 20 light bulbs

    parts for light bulb cost = $2.00

    sells each light bulb = $5.00

    pays = $50.00

    to find out

    Thomas weekly economic profit

    solution

    we know that Economic profit is here as

    Economic profit = Total revenue - explicit cost - implicit cost ... 1

    and

    Total revenue is = $5 * 20 light bulbs

    Total revenue is = $100

    and

    we know that explicit costs is the costs that is involving actual monetary payment like that wages, rent etc

    so

    Implicit costs is cost that is not involving monetary payment like wage and foregone

    so that from equation 1

    Economic profit = $100 - ($2 * 20) - $50

    Economic profit = $10
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