Expenses

wages $100,000

interest paid on loans $30,000

Other expenditures for factors of production $124,000

Total Revenue $360,000

Mitzi, the owner, spends at least 40 hours a week at her place of business. If she closed the business, she could work for her competitor and earn $15,000,000 per year. She also owns the building that houses the business and she could rent it out for $720,000 per year if she closes her business.

a)Calculate the explicit, implicit and economic cost for Mitzi's business.

b)Calculate the accounting profit and economic profit for Mitzi's business.

c)Why is it a contradiction to say that a firm is simultaneously earning an economic profit but suffering an accounting loss?