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 $130 million, explicit costs of $80 million and implied costs of $20 million
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 $130 million, explicit costs of $80 million and implied costs of $20 million
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 $130 million, explicit costs of $80 million and implied costs of $20 million
Expert Solution
Step 1
Accounting profit evaluates the monetary costs that firms incur in production process and total revenue that firm earned from its operations.
Economic profit evaluates both the monetary costs and the opportunity costs and total revenues from the production process.
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