Asked by Lisbeth Galvan on Jun 18, 2024
Verified
The Oh So Humble Bakery sells 300 muffins at a price of $1 per muffin. Its explicit costs for producing 300 muffins are $250. The Oh So Humble Bakery's economic profits are
A) $35.
B) $50.
C) $250.
D) indeterminate from this information.
Economic Profits
Profits exceeding the total cost of capital, including both the cost of debt and the opportunity cost of equity capital.
Explicit Costs
Expenses directly incurred in the course of running a business, such as wages and materials.
- Ascertain economic profitability and demarcate it from accounting profitability.
Verified Answer
RS
Rasamrit SinghJun 20, 2024
Final Answer :
D
Explanation :
Economic profits are calculated by subtracting both explicit and implicit costs from total revenue. Since the question does not provide information about implicit costs, we cannot determine the economic profits.
Learning Objectives
- Ascertain economic profitability and demarcate it from accounting profitability.