The Economics of Dog-Grooming Business: JL Groomers in Champlain, New York

Jim and Lisa's Dog-Grooming Business

Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve minimized at $14 and crosses the average total cost (ATC) curve at $22.

Market Price for Zero Economic Profits

According to the given data, JL Groomers will make zero economic profits if the market price is:

Answer:

$22

Explanation:

JL Groomers will maximize its accounting profit while taking to 0 its economic profits when the marginal revenue = marginal costs.

Economic profits are not the same as accounting profits, since they include the opportunity costs of investing the money somewhere else. That is why in the long run firms are not able to make economic profits since as long as they exist, new competitors will enter the market. But on the short run, firms are able to make economic profit, but by doing so, they will not be maximizing their accounting profit.

Economic profit = accounting profit - opportunity costs

Opportunity costs are the extra costs associated or benefits lost from choosing one activity or investment over another one.

What is the importance of considering opportunity costs in determining economic profits for businesses?

Opportunity costs play a crucial role in determining economic profits for businesses as they represent the benefits forgone from choosing a particular course of action over the best alternative. By factoring in opportunity costs, firms can make more informed decisions about resource allocation, investment choices, and pricing strategies, ensuring that they can maximize their overall profitability in the long run.