Use the following scenario to answer the following questions:
Babak owns a sports practice facility called Boston Batting Cages in Boston,Massachusetts.During the first year of operation,Boston Batting Cages incurred many costs.In that year,Babak spent $5,000 on labor,$2,000 on maintenance,and $1,000 on electricity.Babak took out a loan to open his business,in which he would have earned $1,500,and his previous job,which he could get back at any time,paid him $50,000.
-If Boston Batting Cages received $80,000 in revenues,what were the economics profits?
A) $20,500
B) $72,000
C) $51,500
D) $80,000
E) $50,000

Question

Quizplus · Accepted Answer

Economic profit is calculated as total revenue minus total costs, including both explicit and implicit costs. The explicit costs are $5,000 (labor) + $2,000 (maintenance) + $1,000 (electricity) = $8,000. The implicit costs include the foregone interest from the loan ($1,500) and the salary from the previous job ($50,000). Total costs = $8,000 + $1,500 + $50,000 = $59,500. Economic profit = $80,000 (revenue) - $59,500 (total costs) = $20,500.

Use the Following Scenario to Answer the Following Questions