Situation 22-4 Joe is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. During the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year. Refer to Situation 22-4. What are Joe's economic profits

Question

Aracely Conrad

Business

8 April, 23:32

Situation 22-4 Joe is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. During the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year. Refer to Situation 22-4. What are Joe's economic profits

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Sam Johnston · Answer 1

Economic profit = $25,000

Explanation:

Giving the following information:

Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers.

Job offer = $50,000 per year

The economic profit takes into account the opportunity cost of other options.

Economic profit = 200,000 - 125,000 - 50,000

Economic profit = $25,000