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Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are
A. $75, and her economic profits are $125.
B. $100, and her economic profits are $75.
C. $100, and her economic profits are $25.
D. $25, and her economic profits are $100.

Respuesta :

Answer:

The accounting profits are $100, and the economic profits are $25

The option C. is correct

Explanation:

Accounting profit: The accounting profit is computed by subtracting the sales amount with the expenses.

In mathematically,

Accounting profit = Sales revenue - expenses

                             = $150 - $50

                             = $100

In this, the expense is the seeds cost

And, the economic profit is calculated by subtracting the accounting profit with the implicit cost

In mathematically,

Economic profit = Accounting profit - implicit cost

                          = $100 - $75

                          = $25

The implicit cost is computed by

= Per hour piano charges × number of hours

= $15 × 5

= $75

Hence, the accounting profits are $100, and the economic profits are $25

Katherine's accounting profits are $100, and her economic profits are $25.

What is Katherine's accounting profits and economic profits?

Accounting profit is total revenue less total explicit cost. Explicit cost ncludes the amount expended in running the business

Accounting profit= total revenue - explicit cost

$150 - $50 = $100

Economic profit is accounting profit less implicit cost.  Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives.

Economic profit = $100 - ($15 x 5) = $25

To learn more about explicit cost please check: https://brainly.com/question/25776323

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