Ch 9 EOC Probs (15 pts) Help Save& Exit Submit 2 Check my work Gomez runs a smal
ID: 1144748 • Letter: C
Question
Ch 9 EOC Probs (15 pts) Help Save& Exit Submit 2 Check my work Gomez runs a small pottery firm. He hires one helper at $11,500 per year, pays annual rent of $7,000 for his shop, and spends $22,500 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $6,500 per year if alternatively invested. He has been offered $22,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $4,500 per year. Total annual revenue from pottery sales is $80,00o. points Skipped eBook Print Instructions: Enter your answers as whole numbers a. Calculate the accounting profit for Gomez's pottery firm.Explanation / Answer
Total explicit cost is the cost borned in purchasing factor of production from the market. Explicit cost=11500+7000+22500=41000
Total implicit cost is the opp. Cost of own factor of production=6500+22000+4500=33000
A)Accounting profit=revenue-explicit cost=80000-41000=39000
B) Economic profit=accounting profit-implicit cost=39000-33000=6000