Question

In: Economics

Alex owns and operates a bakery. The bakery sells 3,000 cookies per month at a price...

Alex owns and operates a bakery. The bakery sells 3,000 cookies per month at a price of $2 each and 400 cakes per month at a price of $10 each. It costs Alex $1,500 per month to rent the space in which their bakery operates, $500 per month for utilities and $2,000 per month for the baking ingredients they use to make the cookies. Alex's previous job as a baker for a large restaurant paid an income of $3,000 per month. What is the monthly economic profit of Alex's bakery?

Solutions

Expert Solution

Total revenue = 3000*2 + 400*10

= 6000+4000

= $ 10000

Economic cost = Accounting cost + Implicit cost

= 1500+500+2000 + 3000

= $ 7000

Economic profit = Total revenue - Economic cost

= 10000-7000

= $ 3000

Rahul Sunny answered 2 years ago
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