Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 7, Problem 1.1P
To determine
Is the firm is a profitable firm.
Expert Solution & Answer
Explanation of Solution
The given information:
The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the
The economic profit or loss can be calculated as follows:
The profit is 22,000.
Economics Concept Introduction
Economic profit: Economic profit refers to the additional profit after subtracting the
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Consider a firm that uses capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. Also assume that total labor costs to the firm are $45,000 annually. Assume further that the total capital stock of the firm is currently worth $100,000, that the return available to investors with comparable risks is 10 percent annually, and that there is no depreciation. Calculate the economic profit and accounting profit of this firm? Explain your answer.?
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.
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Accounting profits are $_______________
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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?…
Imagine you are the owner of a downtown Laredo building that you lease out for a yearly amount of $ 45,000 over a span of five years. Assume that the explicit expenses for maintaining the building are $ 20,000, and an additional implicit cost of $15,000 exists. All earnings and costs occur at the conclusion of each year. Suppose the interest rate is 7.5 percent, Determine the present value for both the stream of: (i) your accounting profits. Show your steps. (ii) economic profits. Show your steps
Chapter 7 Solutions
Principles of Economics (12th Edition)
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