Donnie's Donuts Incurs $450,000 Per Year in Explicit Costs and $200,000

question 173

Multiple Choice

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information, what is the economic profit for Donnie's Donuts?

• A)$150,000
• B)$350,000
• C)$600,000
• D)$1.2 million

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus; a measure of the total benefit to society from a market transaction.

Consumer Surplus

The differential between consumers’ readiness to pay a certain amount for a service or good and the payment completed.

Equilibrium

The condition in a market where the quantity demanded equals the quantity supplied, leading to no inherent force for price change.

Property Rights

Legal rights to possess, use, and dispose of assets, including real estate, intellectual property, or physical goods, crucial for the functioning of markets and economies.