13th Edition
Roger A. Arnold
ISBN: 9781337617406




13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

When can a business owner be earning a profit but not covering costs?

To determine

When the business owner earns profit, but not covering the cost.


In this case, the business owner earns positive accounting profit, but the total revenue does not cover the sum of both implicit costs and explicit costs. Example for the business owner earning profit but not covering the cost is as follows:

If the total revenue is $10,000, the explicit costs is $4,000, and implicit costs is $7,000, then the accounting profit can be calculated as follows:

Accounting profit=10,0004,000=6,000

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