Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Instructions: Enter your answers as whole numbers.
Answer: Accounting Profit = Sales - Costs = 100 x $10 - $700 = $300
Economic profit = Accounting profit - Opportunity cost = $300 - 20 hrs x $20 = -$100
Economic profit is calculated considering the time spent by Linda which she could have devoted to her job and earned $400. So, economically, she has incurred a loss of $100.
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