Asked by Dalvin Mitchell on Jun 27, 2024
Verified
Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year.If the store earned an economic profit of $50,000 last year,this means that the store's accounting profit equaled:
A) $94,000.
B) $6,000.
C) $2.05 million.
D) $2.044 million.
Implicit Costs
The opportunity costs of using resources that a firm already owns, typically non-out-of-pocket costs.
Explicit Costs
Direct, out-of-pocket payments for goods or services used in production, such as wages or rent.
Accounting Profit
The financial gain calculated by subtracting total explicit costs from total revenue, not considering implicit costs.
- Attain knowledge on how to figure out economic and accounting profits and distinguish their differences.
Verified Answer
SN
Sarah NipperJun 27, 2024
Final Answer :
A
Explanation :
Accounting profit equals total revenue minus explicit costs. Therefore, accounting profit for the store would be $2.05 million in revenue minus $2 million in explicit costs, which equals $50,000. Adding the implicit costs to the accounting profit gives us the economic profit, which is $50,000 + $44,000 = $94,000.
Learning Objectives
- Attain knowledge on how to figure out economic and accounting profits and distinguish their differences.
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