Asked by Dajon Williams on Sep 23, 2024
Verified
A manager invests $400,000 in a technology that should reduce the overall costs of production.The company managed to reduce their cost per unit from $2 to $1.85.All else equal,if the firm continues its production in the same economic environment,the firms accounting profits should
A) increase
B) decrease
C) stay the same
D) does not affect profits
Accounting Profits
The net income for a company calculated by subtracting total expenses from total revenues, according to standard accounting practices.
Cost Per Unit
The amount of financial expense associated with producing a single unit of a product or service.
Production
The process of creating goods and services through the combination of labor, capital, and resources.
- Understand the distinction between accounting profit and economic profit.
Verified Answer
BC
Baran Cetinkaya5 days ago
Final Answer :
A
Explanation :
By reducing the cost per unit from $2 to $1.85, the company will be able to produce each unit at a lower cost. This means that the profit margins for each unit will be higher, leading to an increase in the overall accounting profits for the firm. Therefore, the correct choice is (A) increase.
Learning Objectives
- Understand the distinction between accounting profit and economic profit.
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