Suppose that a sole proprietorship is earning total revenues of

QUESTION
Q6) Suppose that a sole proprietorship is earning total revenues of ₹1,00,000 and is incurring explicit costs of ₹75,000. If the owner could work for another company for ₹30,000 a year, we would conclude that :

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Solution:
A sole proprietorship is earning total revenues of ₹1,00,000 and is incurring explicit costs of ₹75,000.
₹ If the owner could work for another company for ₹30,000 a year, we would conclude that the firm is incurring an economic loss because the total economic costs are ₹1,05,000 (explicit costs of ₹75,000 + implicit costs of ₹30,000).
₹ The individual is earning an economic profit of ₹25,000 because he could have earned ₹30,000 by working for another company but instead chose to run his own business and earn a profit of ₹25,000 (₹1,00,000 - ₹75,000).₹ Therefore, option (a) is correct.
Correct option is (a)

Chapter 4 Unit 3 questions