Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year.He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year.Downloads generated $130,000 in revenue during the first year.What is his economic profit?
A)$37,000
B)$50,000
C)$43,000
D)$93,000
E)$130,000

Question

Quizplus · Accepted Answer

To calculate economic profit, we subtract both explicit and implicit costs from revenue.

Total explicit costs: $20,000 (investment) + $17,000 (annual expenses) = $37,000

Total revenue: $130,000

Total implicit costs (forgone salary as an engineer): $50,000

Economic Profit: $130,000 - $37,000 - $50,000 = $43,000

Therefore, the correct choice is C). Harvey's economic profit is $43,000.

Harvey Develops Gaming Apps from Home Instead of Working as an Engineer