Homework Answers
In the given question,
Revenue of Zippy's Speedy Car Repair = $250,000
Explicit costs = $150,000
Implicit costs include the forgone earnings of Zippy at his previous workplace i.e., at Joe's Car Repair and the foregone interest on the savings
Implicit Costs = $40,000 + 10% x $150,000 = $40,000 + $15,000 = $55,000
Zippy's economic profit in the first year = Revenue - (Explicit Costs + Implicit Costs) = $250,000 - ($150,000+$55,000) = $250,000 - $205,000 = $45,000
Ans: $45,000
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