Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative. Concept Introduction: Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors. Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

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Answer 1

Question

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

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Answer 2

Question

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

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Answer 3

Question

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

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Answer 4

Question

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

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Answer 5

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

Answer 6

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

Answer 7

Chapter 21, Problem 22P

To determine

Why the figure implies that if the amount of accounting profit were to shrink to zero while the normal rate of return on investment remained unchanged, economic profits necessarily would become negative.

Concept Introduction:

Accounting profit: Accounting profit is the difference between total revenue and explicit costs. Explicit costs are the direct costs incurred by the firm

Economic profit: The economic profit is the difference between total revenue and all explicit cost and implicit costs. The explicit cost is the amount paid as salaries, rent and other cost. The implicit cost is considered as the opportunity cost of factors.

Nominal rate of return: It is the amount that must be paid to the investors to induce investment in business.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 21 - Prob. 21.1LO Ch. 21 - Prob. 21.2LO Ch. 21 - Prob. 21.3LO Ch. 21 - Prob. 21.4LO Ch. 21 - Prob. AFCT Ch. 21 - Prob. BFCT Ch. 21 - Prob. CFCT Ch. 21 - Prob. DFCT Ch. 21 - Prob. EFCT Ch. 21 - Prob. 1CTQ

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Chapter 21 Solutions