Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 23, Problem 5E
To determine
Accounting profit and economic profit is to be determined.
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Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel, $40,000 on seed, fertilizer, and pesticides, and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations What is the accounting profit for the family farm?
Suppose you run a small business in your building and you act also as a manager of your business. If you do not pay yourself a salary and rent of your building what effect will this practice have on the calculation of the firm’s accounting profit? Economic profit? Explain.
Tammy quit her job as a math teacher making $70,000 per year to start her own online business. The first-year revenue totaled to $200,000. During the first year of online business, Tammy paid $50,000 for the office rent and $20,000 for utilities and supplies. What is the amount of accounting profit generated from Tammy’s online business?
$60,000
$200,000
$130,000
$70,000
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Similar questions
- Consider the concepts of accounting profit and economic profit. Suppose you are a consultant and you are meeting with a business owner who is trying to decide whether to keep that business open or open a business in a different industry. Discuss the differences between accounting profit and economic profit and why it should matters in this circumstance.arrow_forwardWhich of the following statements is true? Accounting profit is always positive. Economic profit is always positive. Economic profit is greater than or equal to accounting profit.Incorrect Accounting profit is greater than or equal to economic profit.arrow_forward
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