A bakery generates $100,000 in revenue. It incurs explicit costs of $70,000 and implicit costs of $20,000. How would you classify the bakery's profit?

To understand the bakery's profit, we need to look at both explicit and implicit costs. Explicit costs are the direct expenses the bakery pays, which in this case amount to $70,000. Implicit costs represent the opportunity costs, or what the bakery could have earned if it used its resources differently, totaling $20,000. To find the economic profit, we subtract both types of costs from the revenue: $100,000 in revenue minus $70,000 in explicit costs and $20,000 in implicit costs leaves us with $10,000. Therefore, the bakery's economic profit is $10,000, indicating that it is covering all its costs and has some profit left over.