Asked by Jenna Wright on Jul 11, 2024
Verified
The Sweet Success Bakery sells 500 cakes at a price of $10 per cake. Its total economic costs for producing 500 cakes are $500. The Sweet Success Bakery's economic profits are
A) $100.
B) $3,500.
C) $4,500.
D) indeterminate from this information.
Economic Profits
Profits exceeding the opportunity costs of a firm, representing earnings beyond the breakeven point.
Economic Costs
The total value of all resources used to produce a good or service, including both explicit and implicit costs.
- Estimate the economic profit and separate it from accounting income.
Verified Answer
AS
Abeer ShawiJul 12, 2024
Final Answer :
C
Explanation :
Economic profits are calculated by subtracting total economic costs from total revenue. Here, total revenue is 500 cakes * $10/cake = $5,000. Total economic costs are $500. Therefore, economic profits = $5,000 - $500 = $4,500.
Learning Objectives
- Estimate the economic profit and separate it from accounting income.