Types of Profit Practice Test

Based on the firm’s cost and revenue information, is the firm earning normal profit? A home cleaning service earns total revenue of $75,000. Its explicit costs are $40,000 for supplies and hired help and $15,000 for advertising and insurance, for total explicit costs of $55,000. The owner gives up $18,000 in wages from another job and uses a vehicle that could be leased out for $2,000 per year (implicit costs total $20,000).

Based on the firm’s cost and revenue information, is the firm earning normal profit? A firm earns total revenue of $1,500 per week. Explicit costs are $900 for wages and $300 for materials. The owner gives up a $200-per-week wage elsewhere and uses $10,000 of personal funds that could earn $100 per week in interest elsewhere.