Question

Joe is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $100,000 in total revenues and paid $35,000 to his employees and suppliers. During the course of the year, he received three offers to work for other barbers, with the highest offer being $55,000 per year. What is Joe's accounting profit?

Answer 1

Accounting profit= $65,000

Step-by-step explanation:

Giving the following information:

Last year he earned $100,000 in total revenues and paid $35,000 to his employees and suppliers.

The difference between the accounting profit and the economic profit is that the last one includes the opportunity cost.

In this case:

Accounting profit= 100,000 - 35,000

Accounting profit= $65,000