Suppose a tile business can make a 27 accounting profit by...

Suppose a tile business can make a 27% accounting profit by importing tiles as opposed to a 12% accounting profit if they were to make them locally. What is the economic profit of this decision? Select one: -15% 24% 15% None of the options is correct 42%

Transcript

00:02 We need to calculate shelly's economic profit.

00:05 So we need to consider the accounting profit.

00:07 She earned from her bookstore and subtracted opportunity cost, which is the income.

00:12 She could have earned by working for penguin publishing.

00:15 So accounting profit from the bookstore is equal to dollar 50 ,000 initially pays herself is equal to dollar 30 ,000.

00:49 So total accounting profit is equal to accounting profit subtracted from salary, which is equal to putting the value dollar 50 ,000 subtracted from dollar 30 ,000 evaluating it.

01:22 We get dollar 20 ,000 then opportunity cost of working for penguin publishing is equal to dollar 35 ,000 earnings is capital invested outside a company is equal to dollar 22 ,000 economic profit.

02:26 It's equal to accounting profit subtracted from opportunity cost supporting in the values dollar 20 ,000 subtracted from dollar 35 ,000 added to dollar 22 ,000, which is equal to dollar 20 ,000 subtracted from dollar 57 ,000 evaluating it.

02:51 We get minus dollar 37 ,000.

02:58 So shelly's income profit is minus 37 ,000 indicating a loss when considering her alternative income opportunities.

03:12 So now next we need to decide which opportunity to choose.

03:26 We should compare the revenues and cost associated with each option.

03:29 So opportunity one that is the plastic utensils revenue is equal to dollar 30 ,000 cost is equal to dollar 15 ,000...