Palpatine runs a facial cream business. He can make 100,000 bottles of facial cream per year and sell them for $3.50 each. It costs Palpatine $250,000 for the raw materials to produce the facial cream. Additionally, he must pay $30,000 annually to rent the factory needed to produce his cream. In order to start his business Palpatine withdrew $200,000 from his own savings account. The bank is currently paying a 3% interest rate on saving accounts. Before Palpatine opened his business he worked as a political consultant where he earned $80,000 per year. What is the total revenue Palpatine earns in a year?
What are the explicit costs Palpatine incurs while producing bottles of facial cream? [2 Points]
(c) What are the implicit costs Palpatine incurs while producing bottles of facial cream? [2 Points]
(d) What is the amount of Palpatine’s accounting profit? [2 Points]
(e) What is the amount of Palpatine’s economic profit?