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Suppose that a business incurred implicit costs of $550,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $52 per unit, its accounting:_______

a. profits were $520,000 and its economic profits were $30,000.
b. profits were $200,000 and its economic losses were $350,000.
c. profits were $350,000 and its economic profits were $200,000.
d. losses were $200,000 and its economic losses were $350,000

Sagot :

Anthougoidn

Answer:

its accounting:_______

 

b. profits were $200,000 and its economic losses were $350,000.

Explanation:

a) Data and Calculations:

Units sold during the period = 100,000 units

Selling price per unit = $52

Revenue for the period = $5,200,000 ($52 * 100,000)

Explicit costs =                     5,000,000

Accounting profits =            $200,000

Less Implicit costs                -550,000

Economic profits =             ($350,000)

b) Accounting profits do not include implicit costs (opportunity costs).  Economic profits, on the other hand, include both explicit and implicit costs.  This makes economic profits to be broader and more inclusive than accounting profits.

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