Calculate Liev’s economic profit (be sure to put a negative sign if a loss).

Question

Liev runs a movie memorabilia website. Last year, he earned $35,000 in revenue and had explicit costs of $8,000. Liev could have made $35,000 driving a boat in a water ski show and received an additional $2,000 if he had used the company's inputs in a different way.

Answer 1

Liev's Economic Profit is -$10,000.

Explicit Costs: $8,000

Implicit Costs: $35,000 + $2,000 = $37,000

Economic Profit: $35,000 - ($8,000 + $37,000) = -$10,000.