Asked by
Margo Leskinen
on Oct 08, 2024
Verified
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year.If the firm sold 100,000 units of its output at $50 per unit,its accounting:
A) profits were $100,000 and its economic profits were zero.
B) losses were $500,000 and its economic losses were zero.
C) profits were $500,000 and its economic profits were $1 million.
D) profits were zero and its economic losses were $500,000.
Implicit Costs
Costs that represent the opportunity cost of using resources that are not directly paid for, such as the owner’s time or the use of assets owned by the firm.
Explicit Costs
Direct, out-of-pocket payments for resources or services used in the production process.
Accounting Profits
Represents the difference between total revenue and explicit costs of a firm.
- Execute computations to discern between accounting profit and economic profit.
Verified Answer
DF
Learning Objectives
- Execute computations to discern between accounting profit and economic profit.