D Question 15 (1 point) Sid has decided to leave his $70,000-a-year landscape de

Question

D Question 15 (1 point) Sid has decided to leave his $70,000-a-year landscape design job and open a new kayak business. His insurance cost is expected to be $2,000 per year. The kayaks he owns are valued at $25,000, but he experiences 10% annual depreciation on them. He will also use building space that he owns, but, to do so, he must give up the $10,000 per year in rent he used to receive for the space. Revenue is expected to equal $100,000 per year. Sid's economic profit is: a) $15,500 b) $84,500 c) $82,500 d) $2.000

Explanation / Answer

Option a)

The formula used,

Economic Profit = Revenue - (explicit + Implicit costs)

= 100,000-(0+70000+2000+10000+2500)

= 100,000-(0+70000+2000+10000+2500)

= 15500

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