The Following Is Cost Information for the Creamy Crisp Donut

question 206

Multiple Choice

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
If, other things equal, Creamy Crisp's revenue fell to $286,000,

• A) its implicit costs, including a normal profit, would exceed its explicit costs.
• B) it would earn a normal profit but not an economic profit.
• C) it would suffer an economic loss.
• D) its accounting profit would fall to $0.

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Definitions:

Operational Efficiency

The ability of an organization to minimize waste and maximize output with the least input of resources like time, money, and labor.

Public-Sector Managers

Individuals who oversee and lead government agencies, departments, or publicly owned corporations, ensuring the delivery of public services efficiently and effectively.

Bankruptcy

A legal process through which individuals or businesses unable to meet their financial obligations can seek relief from some or all of their debts.

Competition

The rivalry among businesses to sell their goods and services to consumers, driving innovation and keeping prices low.