Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 2MC

See similar textbooks

Related questions

Q: Q2) Complete the table and show your calculation No. of Total product Marginal product of Average…

A: Total product (TP) means the whole quantity (qty.) of output produces by a company. Marginal product…

Q: Distinguish between implicit and explicit costs and give examples of each. In addition, explain how…

A: Explicit Costs are those costs that are directly observed like the cost involved in hiring labor or…

Q: The per-unit cist of an item is its average total cost=(=total cost/quantity). Suppose that a new…

A: a.)Total cost:Total cost can be calculated as follows:

Q: ADVANCED ANALYSIS A firm faces the following costs: total cost of capital = $2,50O; price paid for…

A: a. TC = $2500 + 100 x $14 + 450 x $4 TC = $2500 + $1400 + $1800 TC = $5700 ATC = TC/Output =…

Q: The Cobb-Douglas production function for a company is given by P(k, ) = 163k75/4/5 where Pis the…

A: please find the explanation below.

Q: Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a…

A: Total revenue is the total receipts collected from the sale of goods or service in the market.…

Q: S = 20L0.30C0.70 this formula L represents the units of labor input and C the units of capital…

A: given that The quantity of steel to be produced is 40,000 tons of steel. (a) The optimization…

Q: 2. A company's production output P is given in tons, and is a function of the number of workers N…

A: Given, P(N,V) = 5N3/4V1/4 or it can be written as P(N,V) = 5N0.75V0.25 a) Workers = 80, so N = 80…

Q: Production function of a company is given by f(x;y)= root of x + root of y where x is labor and y is…

A: Given: f(x;y)= x+yCost of labor = w=2 currency unitsCost of capital =r= 1 currency unit

Q: Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a…

A: Normal Profit is the profit that considers both the implicit as well as explicit costs. It is…

Q: The function for total production of a certain metal at a mining operation is modeled by P(KL) = 40…

A: We are going to use profit maximization method to answer this question.

Q: Assume a Cobb-Douglas production function of the form: q = 10L0 58 K0.79 What type of returns to…

A: Increasing returns to scales are present when increasing all factors of production by t leads to…

Q: At its current short-run level of production, a firm’s average variable costs equal $20 per unit,…

A: Given: Average variable costs (AVC) = $20 per unit Average fixed costs (AFC) = $30 per unit. Total…

Q: When the firm's LRATC curve is downward sloping over its range of production, this implies that A.…

A: Long run average total cost curve shows the lowest cost for producing each quantity of output in the…

Q: When the average cost of producing each individual unit declines as total output increases is…

A: Production function shows the relationship between inputs and output. It reflects how changes in…

Q: The following equations represent the long-run production functions for four different technologies,…

A: Production function exhibit increasing, decreasing and constant returns to scale.

Q: Calculate the following variables for the Scenario A given below: • Explicit (Accounting) Cost, •…

A: Given details:- Business Information( per annum ):- Company's revenue = $ 95,000…

Q: A short run production function assumes that a. The usage of at least one input is fixed b.…

Q: 6. Consider a firm with the following total cost function: TC = 125 +4Q+15Q² (a) What is the measure…

A: Answer - A Answer - Need to find- The measure of firm's economy of scale Given in the question- TC…

Q: What do constant returns to scale indicate that a firm is experiencing? an increasing marginal…

A: please find the answer below.

Q: Which of the following expenses are reported on the income statement when they are incurred?…

A: Income Statement refers to the financial statement of the company which shows the company's income…

Q: 2. Show that the two-input CES production function used in this lecture has DRS, CRS or IRS…

A: Constant returns to scale means as we imposed input by double amount then the output increases by…

Q: Suppose that the production function is given as follows: TPL = 10L + 5L2 + L3 Find the total…

A: The total product of labour represents the total output produced by labour in a firm. The average…

Q: ADVANCED ANALYSIS A firm faces the following costs: total cost of capital = $1,000; price paid for…

A: The firms in the industry are liable to estimate their costs and the benefits for production…

Q: Suppose that a business incurred implicit costs of $400,000 and explicit costs of $3 million in a…

A: Here we calculate the economic and accounting profit by using the given data and choose the correct…

Q: 1. Relation of A and T curves *3* As the level of production increases in the short-run, the Average…

A: As total fixed cost remains constant, the average fixed cost which is TFC/Q keeps on decreasing…

Q: What cost would an accounting statement reveal should current decisions be based on accounting cost.

A: Accounting statement should reveal the cost of production,cost of capital.

Q: Given a production function with a specific amount of fixed resources and one variable resource,…

A: The total product refers to the total output produced by the firm with the given resources and…

Q: For the production process, we can distinguish between short-run and long-run process by the…

A: Production is the process of using inputs (the factors of production) to make useful output. Cost…

Q: Solve the attachment.

A: In the production process, there are different costs related to it, such as variable cost, fixed…

Q: ADVANCED ANALYSIS A firm faces the following costs: total cost of capital = $1,000; price paid for…

A: We’ll answer the first question only that you have specified. Please submit a new question…

Q: Eduardo has $7,000 in savings. His bank pays 6% interest per year on savings. He withdraws all of…

A: Economic costs = Direct costs + Opportunity cost.

Q: Suppose that a business incurred implicit costs of $200,000 and explicit cost of$1million in a…

A: The question has been solved below.

Q: .Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a…

A: Accounting profit can be calculated as follows:

Q: 71. Diminishing returns can be caused by: the physical limitations of variable inputs the physical…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Isoquants are convex because... a. Both factors are subject to increasing returns. b. Both factors…

A: In economics, isoquant curve is usedd to represent the relationship or trade-off between two input…

Q: Suppose that the economy is made up of a single firm, which pays $500 in interest payments, pays…

A: Given the expenditures: Interest payment = $500 Labour costs = $500 Rent of building = $1000

Q: Paradise Pottery had the following costs in May when production is 800 ceramic pots: materials,…

A: Fixed and variable costs When a company manufactures a product, it will incur two types of costs:…

Q: Which among these production functions exhibit increasing returns to scale? (Clue: you should scale…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: From your knowledge of the relationships among the various production functions, complete the…

A: Total Product =Average product x Variable Input Average Product = Total Product/Variable Input…

Q: Zubair purchases material by Rs. 20,000 per year and pays R. 10,000 for storage space. He recently…

A: The profit is a term that defines the net benefit to a firm from participating in the market. It is…

Q: AC1 AC2 AC1 AC2 LRAC 01 02 Output per time period Refer to the graph above to answer this question.…

A: The expenses that are being incurred by the business for carrying out its day-to-day transactions…

Q: Question Completion QUESTION 13 indicate whether the inputs below are variable (V) or fixed (F) in…

A: Answer: Variable, Meat in hamburgers, In the short run it would be variable because meat production…

Q: Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a…

A: Implicit costs = $200,000 Explicit costs = $10,00,000 Number of units = 4000 units Selling price =…

Concept explainers

Accounting and Economic Profit analysis

One comes across the concept of Profits in the context of business and in analyzing the results of business activity. Profits of a business can be accounting profits, and they can also be economic profits. So how does one understand the concept of accounting versus economic profits?

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose that a business incurred implicit costs of $200,000 and explicit cost of$1million in a specific year if the firm sold 4,000 units of the output at $300 per unit , the accounting profits were A)$00,000 and it's economic profits were zero B)$200,000 and it's economic profits were zero C)$100,000 and it's economic profits were$100,000 D)zero and it's economic loss was $200,000
upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of RM60,000 annually. Last year you earned a total revenue of RM100,000. Rent and supplies last year were RM50,000. 2.1) Your annual economic costs are
A firm faces the following costs: total cost of capital = $1,000; price paid for labor = $12 per labor unit; and price paid for raw materials = $4 per raw-material unit. a. Suppose the firm can produce 5,000 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5,000 units of output? b. Now assume the firm improves its production process so that it can produce 6,000 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 6,000 units of output? c. If units of output can always be sold for $1 each, then by how much does the firm’s profit increase after it improves its production process? d. Suppose that implementing the improved production process would require a one-time-only cost of $1,100. If the firm only considers this year’s profit, would…
The cost formula for a company can be modeled by C=1092+40x+0.1x2C=1092+40x+0.1x2 where xx represents the number of items made. A formula for the company's income is modeled with R=108x−0.9x2R=108x-0.9x2, where xx is the number of items sold. A company will break even when its costs equal its income. How many items must a company make and then sell to break even? Answer: (If there are multiple answers, separate the answers with a comma.)
Explain the difference between implicit and explicit costs. Give two examples of when an explicit cost is different from an implicit cost. Explain the difference between accounting and economic profit. Give two examples of when they differ. Explain the difference between economies and diseconomies of scale. Provide examples of when an actual firm might benefit from economies of scale or be harmed by diseconomies of scale
What cost would an accounting statement reveal should current decisions be based on accounting cost.
Suppose that a firm produces 300,000 units a year and sells them all for $3 each. The explicit costs of production are $500,000 and the implicit costs of production are $200,000. The firm earns an accounting profit of:
Product Costs Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 50,000 units will be produced, with the following total costs: Direct materials $120,000 Direct labor 60,000 Variable overhead 25,000 Fixed overhead 220,000 Required: If required, round your answers to the nearest cent. 1. Calculate the prime cost per unit.$ per unit 2. Calculate the conversion cost per unit.$ per unit 3. Calculate the total variable cost per unit.$ per unit 4. Calculate the total product (manufacturing) cost per unit.$ per unit 5. What if the number of units increased to 55,000 and all unit variable costs stayed the same? indicate the impact on the following costs. a. Total direct materials increases by 10% b. Total direct labor increases by 10% c. Total variable overhead increases by 10% d. Total fixed overhead does not change no change e. Unit prime cost does not change no change f. Unit conversion cost decreases by less than 10% What would…
Answer the following Questions. Include referencing where additional sources have been used a. Why will firms in most markets be located at or close to the bottom of the long-run average cost curve? b. Distinguish between implicit and explicit costs. How is it possible to have positive accounting profit and negative economic profit concurrently? c. Distinguish between economies of scale and constant returns to scale. What shape will the long-run average cost curve have for economies of scale and constant returns to scale. d. What is the difference between production in the short run and production in the long run? Explain the shape of the long-run cost curve in relation to short-run cost curves?
This question contains two parts and they are independent of each other. Part 1: During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expenses, raw materials, rent, and utilities. The firm’s owner has provided $750,000 of her own money instead of investing the money and earning a 10 percent annual rate of return. The accounting costs of the firm are $_______________ The opportunity cost is $_______________ Total economic costs are $_______________ Accounting profits are $_______________ Economic profits are $_______________ Part 2: Higher personal taxes in the U.S. will affect personal disposable income which in turn will affect the domestic demand for goods and services. Costs of production, however, continue declining resulting from outsourcing overseas. What do you expect the U.S. output and prices in the near future?…
Classify each of the following cost items as mostly fixed or variable1. Raw materials2. Direct Labor3. Depreciation4. Supplies5. Utilities6. Property taxes7. Interest on borrowed money8. Administrative salaries9. Payroll taxes10. Insurance (building and equipment)11. Clerical salaries12. Sales Commissions13. Rent
One of the components of direct cost of construction projects is equipment cost where a contractor has the option to rent or to buy the needed equipment for a construction activity. Suppose the contractor owns equipment needed for a project, in the cost estimates will the contractor charge equipment cost? Why?