Zippy is earning $30 comma 000 per year working for joe's car repair. he also has savings of $150 comma 000, on which he is earning 10% annual interest. he decides to leave joe's car repair to invest his savings in starting his own car repair business. in the first year, zippy's speedy car repair earns revenues of $200 comma 000 and has explicit costs of $75 comma 000. zippy's economic profit (or loss) in the first year is $ nothing. (round your answer to the nearest dollar.)

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Rupicapra Rupicapra · Answer 1 · 2018-08-02T08:04:20+02:00

Zippy's economic profit is $80,000.

Economic Profit = Revenues - (Explicit Cost + Implicit Cost)

Implicit cost or opportunity cost refers to the loss an individual incurs from an alternative decision, as a result of making a decision.

In this question, Zippy's implicit costs are the $30,000 from his job at Joe's car repair.

Additionally, he loses the 10% interest he would have earned on his savings of $150,000 had he not started his business.

So Zippy's implicit cost is $45,000 ($30,000 + $15,000)