Mary is a young doctor who has just started her own practice. Her previous position paid her $80,000 a year. For office space, she uses a building which she owns and which she has rented in the past for $40,000 a year. Her total revenue from her new practice is $250,000. She pays $50,000 to other firms for material and supplies, and she pays $40,000 in wages to her office nurse. Assume that Mary's building and equipment do not depreciate and that her normal profit is $20,000. a. Which of Mary's costs are explicit costs and what is their total?

b. Which of Mary's costs are implicit costs and what is their total?

c. What is the opportunity cost of all factors of production employed by Mary?

d. What is Mary's economic profit? (4 points)

2. Dairy is a perfectly competitive industry. Suppose that dairy ranchers are all incurring an economic loss.

a. Explain what happens as time passes?

b. Explain what is the long-run equilibrium outcome? (4 points)