Profit Calculation for Shrimp Fisherman Bubba
What is Bubba's annual total profit?
a. $8,000
b. $12,000
c. $20,000
d. $32,000
Answer: a. $8,000
Bubba makes $8,000 in total revenue each year. Profit is the amount that remains after capital, labor, and land costs have been paid for. There are two ways to view profit: bookkeeping and financial benefit. Accounting profit is the difference between total revenue (return) and explicit costs. Economic profit, on the other hand, considers both implicit and explicit costs.
According to the data provided, Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He sells the shrimp for $5 per pound and incurs an average total cost of $3 per pound for catching shrimp. To calculate Bubba's annual total profit, we need to consider the difference between total revenue and total cost.
In this case, Bubba's Total Revenue (TR) can be calculated as: TR = Price per pound * Quantity = $5 * 4,000 = $20,000
Bubba's Total Cost (TC) can be calculated as: Average Total Cost per pound * Quantity = $3 * 4,000 = $12,000
Therefore, Bubba's Profit (π) is the difference between TR and TC: Profit = TR - TC = $20,000 - $12,000 = $8,000
So, the correct answer is a. $8,000. Bubba makes $8,000 in total profits each year by catching and selling shrimp.