AP Microeconomics - Costs and Profits

Instead of being employed at a printing company

at a salary of $25,000 per year, Sally starts her

own printing firm. Rather than renting a building

that she owns to someone else for $10,000 per

year, she uses it as the location for her company.

Her costs for workers, materials, advertising, and

energy during her first year are $125,000. If the

total revenue from her printing company is

$155,000, her total economic profit is

• -$5,000

• $5,000

• $20,000

• $30,000

• $120,000

WHAT ARE THE EXPLICIT COSTS?

It costs 100 per day to rent a factory. It costs 20 per day to rent machines needed in the factory. The machine operator is paid 80 per day. To make 1.5 bolts of denim, the material cost is 45 per day. This will allow the owner to produce 15 pairs of jeans a day. The jeans sell for 20 per pair.

• $225 per day

• $245 per day

• $165 per day

• $250 per day

WHAT IS THE ACCOUNTING PROFIT?

It costs $100 per day to rent a factory. It costs $20 per day to rent machines needed in the factory. The machine operator is paid $80 per day. To make 1.5 bolts of denim, the material cost is $45 per day. This will allow the owner to produce 15 pairs of jeans a day. The jeans sell for $20 per pair.

• $0 per day

• $25 per day

• $55 per day

• $300 per day

Kanesha is an entrepreneur and has recently opened her first coffee shop, The Coffee Cat. Kanesha pays $5,000 rent each month, $4,800 for monthly employee payroll, and $1,200 for supplies each month. She was planning on selling several of her own tables and chairs on Craigslist for $1,500, but instead she brought them to The Coffee Cat. Additionally, she quit working as an accountant where she was earning $52,000 per year to open up the shop. If the shop earns $180,000 in revenue this year, determine her yearly ACCOUNTING PROFIT.

(a)  

Kanesha is an entrepreneur and has recently opened her first coffee shop, The Coffee Cat. Kanesha pays $5,000 rent each month, $4,800 for monthly employee payroll, and $1,200 for supplies each month. She was planning on selling several of her own tables and chairs on Craigslist for $1,500, but instead she brought them to The Coffee Cat. Additionally, she quit working as an accountant where she was earning $52,000 per year to open up the shop. If the shop earns $180,000 in revenue this year, determine her yearly ECONOMIC PROFIT.

(a)  

(a)   is an economic situation where a firm's revenue is equal to the sum of their explicit and implicit costs.

There are a few real estate companies in a certain city, all of which are earning high economic profits. Explain what will likely happen next.