Which of the following scenarios best illustrates the concept of economic profit considering explicit costs in a real-world business decision-making context?

Economic profit is the difference between total revenue and total costs, including both explicit costs (like rent and wages) and implicit costs (like the owner’s time or missed opportunities). For example, imagine a bakery that earns $100,000 in sales. If the owner spends $60,000 on ingredients, rent, and salaries, the explicit costs are $60,000. However, if the owner could have earned $40,000 working elsewhere, this is an implicit cost. Therefore, the economic profit would be calculated as $100,000 in revenue minus $60,000 in explicit costs and $40,000 in implicit costs, resulting in zero economic profit, which means the owner is not gaining anything extra compared to other opportunities available.