Asked by Nouman Hasan on Sep 23, 2024
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.This affects
A) Economic profits
B) Accounting profits
C) Both a and b
D) None of the above
Economic Profits
The surplus gained by a firm when total revenue exceeds total costs, including both explicit and implicit costs, reflecting the financial advantage of a particular course of action.
Accounting Profits
The total revenue of a business minus explicit costs; also known as net income.
Production Costs
The total expenses incurred in the manufacturing or creation of a product or service.
- Gain an understanding of economic profits, encompassing the nuances of implicit and explicit costs.
- Examine the influence of investments on minimizing production costs and its consequence on economic gains.
- Clarify the difference between earnings from an accounting perspective and economic profit.
Learning Objectives
- Gain an understanding of economic profits, encompassing the nuances of implicit and explicit costs.
- Examine the influence of investments on minimizing production costs and its consequence on economic gains.
- Clarify the difference between earnings from an accounting perspective and economic profit.
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