Please answer all parts and show work , thank you 3. Jessica is a young doctor w

Question

Please answer all parts and show work , thank you

3. Jessica is a young doctor who has just started her own practice. Her previous position paid her S80,000 a year. For office space, she uses a building which she owns and which she has rented in the past for $40,000 a year. Her total revenue from her new practice is S250,000. She pays $50,000 to other firms for materials and supplies, and she pays $40,000 in wages to her office nurse. Assume that Jessica's building and equipment do not depreciate and that her normal profit is $20,000. a. Which of Jessica's costs are explicit costs and what is their total? b. Which of Jessica's costs are implicit costs and what is their total? c. What is the opportunity cost of all factors of production employed by Jessica? d. What is Jessica's economic profit?

Explanation / Answer

Answer

a)

Explicit cost=nurse salary +wage+normal profit

=50000+40000+20000=110000

b)

Implicit cost=salary+rent

=80000+40000=120000

c)

oppotunity cost=normal profit=20000

d)

economic profit=total revenue-explicit cost-implcit cost

=250000-120000-110000=20000

The economic profit=$20000

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