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Hamad Malik
on Nov 25, 2024

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Suppose that a firm produces 275,000 units a year and sells them all for $8 each. The explicit costs of production are $1,800,000 and the implicit costs of production are $400,000. The firm earns an accounting profit of

A) $400,000 and an economic profit of $0.
B) $2,200,000 and an economic profit of $275,000.
C) $275,000 and an economic profit of $2,200,000.
D) $0 and an economic profit of $400,000.

Explicit Costs

These are direct payments made to others in the course of running a business, such as wages, rent, and materials.

Implicit Costs

Costs that represent potential benefits foregone when resources are not utilized in their next-best alternative use.

Economic Profit

The financial gain achieved when revenues from business activity exceed the explicit and implicit costs of that activity.

  • Calculate the comprehensive economic expenses for a corporation, factoring in both explicit and implicit costs.
  • Differentiate the notions of economic profit and accounting profit.
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maqhfirah suharlasNov 30, 2024
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