Answer:
Osvaldo and Pearl Tea Shop
His economic profits if he opens the ice cream store is:
= ($20,000).
Explanation:
a) Data and Calculations:
Annual salary as a soccer coach = $40,000
Rent income from a small store = $60,000
Expenses for the Pearl tea shop
Ingredients and labor = $80,000
Insurance = 20,000
Total expenses = $100,000
Revenue from the Pearl Tea Shop = $140,000
Less total expenses 100,000
Less opportunity cost (rent income) 60,000
Economic loss = $20,000
His economic profits if Osvaldo opens the ice cream store is ($20,000).
Economic profit is define as the difference between the revenue received from the sale of an output and the associated costs of all factors of production.
First we need to compute total expenses.
= Ingredients and labor + Insurance
= $80,000 + $20,000
= $100,000
Economic loss
= Revenue from the Pearl Tea Shop - Total expenses - opportunity cost (rent income)
= $140,000 - $100,000 - $60,000
= ($20,000)
Hence, Osvaldo economic profits if he opens the ice cream store is ($20,000)
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