Your firm is selling 10,000 units of output at a price of $10 per unit. Your firm’s total explicit cost is $70,000. Your firm’s implicit cost of capital is $10,000, and your opportunity cost is $20,000.
Rubric for FRQ 1 (5 points)
1 point: Total revenue = $100,000
1 point: Total implicit cost = $30,000
1 point: Accounting profit = $30,000
1 point: Economic profit = $0
1 point: Because your firm earns normal profit, there is no better alternative use for your resources.