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
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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
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- What is the difference between fixed costs and variable costs?How do we calculate marginal product?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.
- 4. Last year Wei Guan Inc. had $350 million of sales, and it had $270 million of fixed assets that were used at 63% of capacity. In millions, by how much could Wei Guan's sales increase before it is required to increase its fixed assets? Please TYPEUpon graduating with an accounting degree, you open your own accounting firm of which you and your assistant are the only employees. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $50,000 annually. Last year you earned a total revenue of $120,000. Rent and supplies last year were $50,000. Your assistant's salary is $30,000 annually. annual operating profit? A) -$10,000. B) $40,000. C) $70,000. D) $80,000.The sole proprietor of the "Books and More" bookstore receives all accounting profits earned by her firm and a $28,000-a-yearsalary she pays herself. She has a standing salary offer of $35,000 a year if she agrees to work for a large corporation. If she had invested her capital outside her own company, she estimates that would have returned $22,000 a year. Last year, her accounting profit was $50,000. What was her economic profit?
- 1. Throughout this course, we have solved many optimization or profit maximizing problems. a. State the rules used for unconstrained (regular) optimization and for constrained optimization. b. Using your own words, explain the rationale behind each stated rule as if you were explaining them to someone who has not yet completed this course: c. What doe economist mean when they use the term marginal? d. State how to compute Profit and explain how account profit and economic profit provides different insights to a firm’s current operations.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 $_________.26) Which of the following is a fixed cost for a chocolate factory over the course of a month? A) Depreciation of machines due simply to their age B) Overtime pay C) The cost of cocoa D) The cost of electricity (paid quarterly) for running the mixing machines
