Scenario 13-7
Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business.
-Refer to Scenario 13-7. Julia's economic profits are
A)$160,000.
B)$150,000.
C)$135,000.
D)$125,000.

Question

Quizplus · Accepted Answer

Julia's economic profit is calculated by subtracting both explicit and implicit costs from her total revenue. Her explicit costs are $15,000, and her implicit cost (opportunity cost of not doing pet sitting) is $10,000. Therefore, her economic profit is $150,000 - $15,000 - $10,000 = $125,000.

Scenario 13-7 Julia Prepares Tax Returns and Does Bookkeeping. Last Year Her