Calculates the book profit or loss as well as the economic gain or loss in each of the following situations: A company with total revenue of $350,000, explicit costs of $395,000 and implied costs of $40,000
Calculates the book profit or loss as well as the economic gain or loss in each of the following situations: A company with total revenue of $350,000, explicit costs of $395,000 and implied costs of $40,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Calculates the book profit or loss as well as the economic gain or loss in each of the following situations:
A company with total revenue of $350,000, explicit costs of $395,000 and implied costs of $40,000
Expert Solution
Step 1
Book profit is also known as the accounting profit which represents the financial value of the company in the economy after the deduction of explicit cost like the cost of production, operations management etc.
Economic profit is the market value of the goods and services sold by the company or firm, it is the difference between the implicit cos that the company pays internally for the production process plus the explicit cost incurred from the total revenues earned by the firm in the market.
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