The Following Is Cost Information for the Creamy Crisp Donut

question 148

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
Refer to the data.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 zero.

---

Definitions:

Compulsory Union Membership

A situation where employees are required to join a union as a condition of their employment.

Agency Shop Agreement

An arrangement whereby employees must pay union dues but aren’t required to join the union.

Nonunion Workers

Employees who are not members of a labor union and typically do not have the collective bargaining support that unionized workers receive.

Unionization Rate

The proportion of workers who are members of a union within a particular industry or workforce.