MANAGERIAL ECONOMICS (LOOSELEAF)
5th Edition
ISBN: 9781337571371
Author: FROEB
Publisher: CENGAGE L
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Chapter 3, Problem 1MC
To determine
Calculate the accounting profit.
Expert Solution & Answer
Explanation of Solution
Accounting profit refers to the excess revenue after subtracting the total cost from the total revenue. The revenue can be calculated as follows:
Thus, the revenue is $450000. The explicit cost is given as $150000. Therefore, the accounting profit can be calculated as follows:
The accounting profit of the firm is equal to $300000. Thus, option ‘a’ is correct.
Economics Concept Introduction
Accounting profit: Accounting profit refers to the excess revenue after subtracting the total cost from the total revenue.
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Students have asked these similar questions
Assume that a firm’s total revenue is $200,000 per year. It pays its workers wages of $105,000 per year and buys raw materials of $80,000 per year. If the owner has $200,000 invested in this business and could earn 9% by placing this $200,000 in another business, then
A) economic profits and accounting profits are both positive.
or
B)opportunity cost is zero.
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?
Explain every point with graph.
1. Economic and business cost .
2. Short run production analysis / law of variable proportion.
3. Short run cost analysis.
Chapter 3 Solutions
MANAGERIAL ECONOMICS (LOOSELEAF)
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Similar questions
- The following is cost information for the Creamy Crisp Donut Company Entrepreneur's potential earnings as a salaried worker - $60.000 Annual lease on building = $30,000 Annual revenue from operations = $250,000 Payments to workers = $100,000 Utilities (electricity, water disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 If, other things equal, Creamy Crisp's revenue rose to $284.000 A. its implicit costs would exceed its economic costs B.it would earn a normal profit but not an economic profit C. it would suffer an economic loss D. it's accounting profit would fall to $0arrow_forwardEconomic costs of production differ from accounting costs in that Select one: a. economic costs include expenditures for hired resources while accounting costs do not. b. economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. c. accounting costs include expenditures for hired resources while economic costs do not. d. accounting costs are always larger than economic costs. e. Economic costs are historical costsarrow_forward57: The creation of a unit of good Y requires the work of 3 specialists and 7 units of capital. The going pay is $ 4. The lease on a unit of capital is $ 1. What ought to be the peripheral actual result of capital all together for the creation to be completed basically cost and what is this cost if the minimal actual result of work is 2?arrow_forward
- X and Y are factors of production. X's marginal product is 30 and Y's marginal product is 20. X=5 dollars for each unit, Y= 4 dollars for each unit. Since Y costs less than X, can the firm keep produce the same output at a cheaper cost by using less of X and more of Y? Explain why or why not.arrow_forward1. When Fixed Cost change, which of the following other costs will change? Explain why you selected the costs you did. Variable Cost Total Cost Average Total Cost Average Variable Cost Average Fixed Cost Marginal Cost 2. When Variable Cost change, which of the following other costs will change? Explain why you selected the costs you did. Fixed Cost Total Cost Average Total Cost Average Variable Cost Average Fixed Cost Marginal Cost 3. What assumption is made concerning short-run production that causes the short-run cost curves to have their typical shapes?arrow_forward2.1 Discuss the relationship that exists amongst the three short-run total cost curves.Motivate your answer with the aid of a diagram. 2.2 Explain in detail, the shape of the individual supply of labor curve. Illustrate youranswer with the aid of a diagram.arrow_forward
- Distinguish between implicit and explicit costs and give examples of each. In addition, explain how explicit and implicit costs affect the distinction between economic profit and accounting profit. What explains the distinction between the two measures of profit?arrow_forwardExplain 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 scalearrow_forward
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