5. Suppose Fahad is owner of Potato Fries shop in Riyadh City. He earns SAR 500,000 in revenue per year from this business. He spends SAR 1000 a month on GAS for his stove, SAR 1000 a month on rent, and SAR 1500 a month on ingredients. He used to be a teacher and earned 440,000 a year before he opened up Potato Fries shop. Normal profit for a potato fries' business is SAR 30,000. What is Fahad's economic profit? Answer . Page 7 of 8

5. Suppose Fahad is owner of Potato Fries shop in Riyadh City. He earns SAR 500,000 in revenue per year from this business. He spends SAR 1000 a month on GAS for his stove, SAR 1000 a month on rent, and SAR 1500 a month on ingredients. He used to be a teacher and earned 440,000 a year before he opened up Potato Fries shop. Normal profit for a potato fries' business is SAR 30,000. What is Fahad's economic profit? Answer . Page 7 of 8

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 39P: A firm is considering an investment that will earn a 6 rate of return. If it were to borrow the...

See similar textbooks

Similar questions

What is die difference between accounting and economic profit?
2. Explain the difference between economic profit and accounting profit.
Consider the total cost and total revenue of Farm Fresh Diary Output Quantity (Milk in Liters) Total Revenue ( in Rupees) Total cost ( in Rupees) 0 0 30 1 80 50 2 160 80 3 240 120 4 320 170 5 400 230 6 480 300 7 560 380 8 640 470 Calculate Price, Average Revenue, Marginal revenue. Explain the conditions under which these values remain the same? Calculate Profit, Marginal cost and change in Profit. What output quantity of milk maximizes profit for Farm Fresh Diary? Graph MC and MR curves of Farm fresh Diary. What are the rules of Profit Maximization suggested by this graph? Suppose a tax of Rs.20 is imposed and government fixes price of milk at Rs.80 a liter. Then what should be strategy of Farm Fresh Diary?
# 13 Aabir, a milk farmer, earns $300k per month in revenue. His monthly costs include Administrative costs $40k, Feed $60k, Equipment & maintance $40k, Labor $70k, Transportation $10k, Miscellaneous $20k. Foregone rent for the land used for the cattle grazing $10k. Value of his son's time that helps on weekends $2k, Owner's salary $ 10k, Aabir's accounting & economic profit respectively are: a.) 60k & 48k b.) 50k & 38k c.) 60k & 38k d.) 38k & 38k
8. A firm is earning an accounting profit of $5,000. Its implicit costs are $3,000, explicit costs are $8,000, and its economic profit is $2,000. What must its total revenue be? A-$7,000 B-$10,000 C-$13,000 D-$18,000 E-Indeterminate 9. If a firm is maximizing its profit and is earning positive economic profit, which of the following must be true? A- Average total cost < price; marginal cost = marginal revenue B-Average total cost > price; marginal cost = marginal revenue C-Average total cost < average revenue; marginal cost > marginal revenue D-Total cost > total revenue; marginal cost > marginal revenue E- Total cost = total revenue; marginal cost > marginal revenue
5d What is the relationship between accounting profit and economic profit? Which is relevant for a firm’s decision to continue production and why? Give examples as to what may cause a divergence between accounting and economic profit
4. Problems and Applications Q4 Ball Bearings, Inc., faces costs of production as follows: Quantity Total Fixed Costs Total Variable Costs (Dollars) (Dollars) 0 100 0 1 100 50 2 100 70 3 100 90 4 100 140 5 100 200 6 100 360 Complete the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production. Quantity Total Cost Marginal Cost Average Fixed Cost Average Variable Cost Average Total Cost (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) 0 1 2 3 4 5 6 The price of a case of ball bearings is $50. Seeing that he can't make a profit, the company's chief executive officer (CEO) decides to shut down operations. The firm's…
Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. Your aunt’s opportunity costs comprise * If your aunt thought she could sell $510,000 worth of merchandise in a year, what is your aunt’s accounting profit? *$10,000-$40,000$460,000$0Given the above situation, what is your aunt’s economic profit? *$10,000-$40,000$460,000$0
5) A firm that has positive accounting profit does not necessarily have positive economic profit. True or false? Explain.6) Assume that marginal cost in production is greater than average variable costs. Can you determine whether average variable cost is decreasing or increasing? Explain.
5:23 The amount that a firm pays for all of the inputs that go into producing goods and services is the: O average cost. O total revenue. O total price. O total cost.
b. Calculate Theo's accounting profit
1.During a year of operation, a firm collects $5,000,000 (TR) in revenue and spends $3,500,000 (EXPLICIT) on labor expense, raw materials, rent, and utilities. The firm’s owner has provided $1,000,000 of her own money instead of investing the money and earning a 12 percent annual rate of return. Show your work. a. The explicit costs of the firm are $_________. The implicit costs are $_________. Total economic cost is $__________. b. The firm earns accounting profit of $________. The firm’s economic profit is $_________.