Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

A) $500,000 and an economic profit of $200,000.
B) $2,000,000 and an economic profit of $200,000.
C) $200,000 and an economic profit of $2,000,000.
D) $200,000 and an economic profit of $500,000.

Explicit Costs

Costs that involve direct monetary payment by a firm for the resources needed in production, such as wages and materials.

Implicit Costs

The opportunity costs of utilizing resources owned by the company for its operations instead of other purposes.

Accounting Profit

The financial gain calculated by subtracting total explicit costs from total revenues, excluding the consideration of implicit costs or opportunity costs.