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The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $40,000Annual lease on building = $25,000Annual revenue from operations = $420,000Payments to workers = $150,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's total revenues exceed its total costs, including a normal profit, by
A) $309,000.
B) $183,000.
C) $237,000.
D) $111,000.
Normal Profit
The minimum level of profit needed for a company to remain competitive in the market, covering its opportunity costs.
Entrepreneur's Potential Earnings
The hypothetical income an entrepreneur could earn, considering the risks and opportunities associated with starting and running a business.
Annual Lease
A contract or agreement stipulating the rental terms of a property for one year, often specifying the rent amount, payment schedules, and other conditions.
- Calculate a firm's total economic costs including explicit and implicit costs.
- Determine the effect of changes in input or output levels on a firm's cost and revenue.
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Learning Objectives
- Calculate a firm's total economic costs including explicit and implicit costs.
- Determine the effect of changes in input or output levels on a firm's cost and revenue.
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