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15 July, 07:39

A business owner makes 50 items by hand in 40 hours. She could have earned $20 an hour working for someone else. Her total explicit costs are $200. If each item she makes sells for $15, her economic profit equals what?

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  1. 15 July, 08:49
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    - $250

    Explanation:

    The economic profit calculation is presented below:

    = Total revenues - explicit cost - implicit cost

    where,

    Total revenues = Explicit revenue * implicit revenue

    = $15 * 50 items

    = $750

    Explicit cost = $200

    Implicit cost = $20 * 40 hours = $800

    Now place these values in the formula above

    So the value would be equal to

    = $750 - $200 - $800

    = - $250
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