Answered: Define and explain the differences…

Business

Economics

Define and explain the differences between accounting profit and economic profit

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: Production And Costs

Section21.2: Two Sides To Every Business Firm

Problem 2ST

See similar textbooks

Related questions

Q: By using the notions of fixed and variable costs explain why theme parks close in winter months

A: Fixed and variable cost Fixed cost refers to cost that remains fixed at all level of output and does…

Q: explain the short run fixed costs and the variable cost in modern economics?

A: Cost refers to the amount of money that is spent by the firm to produce a product . Cost refers…

Q: Give typing answer with explanation and conclusion If Thomas made an accounting profit of $45,000 in…

A: Accounting profit refers to the financial gain earned by a business after deducting its explicit…

Q: What happens to the average fixed cost, when the output of a firm increases.

A: # In an economy, the average fixed cost is referred to be as fixed cost per unit of output produced.…

Q: Explain why it is not economical for a firm to operate under increasing returns and negative…

A: Solution: Increasing return: It is the first phase of production. In this phase every additional…

Q: Which of the following statements is true? Accounting profit is always positive.…

A: The statement "Accounting profit is greater than or equal to economic profit" is true.…

Q: Can you explain to me why in the short run, firms only use variable cost to determine whether or not…

A: Shutdown point is a point of production where a firm decides not to continue production as producing…

Q: In the long run, should we perfectly competitive firms a positive accounting profit? Explain your…

A: Perfectly competitive firms are firms operating in a market structure where there are many small…

Q: One A4 page please Explain why there are no fixed costs in the long run

A: In long run, all the fixed costs that exist in short run becomes variable hence, there is no fixed…

Q: If a entrepreneur's accounting profit is positive but their economic profit is negative should they…

A: In a market, an entrepreneur enters and able to make accounting profit, it is the Sita when his…

Q: If Hasan runs the restaurant himself and before setting up this business, he was working in a…

A: An economic profit is the difference between the revenue a commercial entity has received from its…

Q: What happens when a company doesn't follow economic thoery and charges pries below the marginal…

A: At the point when an organization doesn't follow economic theory and charges costs below the…

Q: What is the relationship between the marginal cost (MC) curve and marginal product MP) curve of a…

A: The marginal product is the change in the total product when an additional unit of the variable…

Q: Page 1 of 1 Answer each of the following questions and don't forget to indicate the sign (positive…

A: Economic profit is the money left over after all direct and indirect expenses have been paid.…

Q: Explain the difference between accounting and economic profit. Give two examples of when they…

A: Accounting profit means that profit which is earned after the explicit costs are deducted from…

Q: We expect the marginal cost to increase as this firm produces more computers. But when the firm…

A: The rise or fall in the cost of producing/providing one more product is referred to as marginal…

Q: Economists assume that by pursuing a strategy of cost minimization of production, most firms try to…

A: Expansion path shows the cost minimizing input mix (K and L) of the firm plotted on both sides of…

Q: variable costs (AVC), average total costs (ATC), and marginal costs (MC) to fill in the missing…

A: Fixed cost refers to the cost that stays same at all levels of output. Variable cost is the cost…

Q: Marginal revenue must exceed marginal cost.Explain why?

A: Total revenue is the total receipts collected from the sale of goods or services in the market. The…

Q: Family Mart like inner city grocery stores, sometimes exist even though they do not earn economic…

A: Hi Student, thanks for posting the question. As per the guideline we are providing answers for the…

Q: Use the table below to answer questions about Benny: Total Revenue Cost of Lemonade Wages Interest…

A: Given that Total Revenue$300,000 Cost of Lemonade$11,000Wages$2,000Interest$6,000 Benny the…

Q: True or False? Briefly discuss. a. If a firm makes zero economic profit, the firm earns revenue that…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: Briefly explain the short run fixed costs and the variable cost in modern economics?

A: Short-run is the time period that is less than or equal to a year. The costs can be divided into two…

Q: Which of the following is correct with respect to economic profit? PLEASE EXPLAIN THANKS! A.…

A: The main objective of any firm is profit maximization and a firm maximizes its profit by producing…

Q: With the help of an example explain the difference between accounting and economic profit. Building…

A: The term perfect t competition refers to a theoretical market structure. during a perfect…

Q: he difference between economic profit and accounting profit is that economic profit is calculated…

A: here we find the whether the given statement is true or false as follow;

Q: The difference between accounting profit and economic profit is that accounting profit is the…

A: An explicit cost is the clearly stated costs that a business incurs. For example, employee wages,…

Q: What is the difference between accounting profit and economic profit? Select one: a. Accounting…

A: Firms earn revenue with the help of the sale of the products that it produces. On the other hand, it…

Q: The gap that exists in a graph between total costs and fixed costs represents the variable costs of…

A: Total cost is the sum of variable and fixed costs. TC = TVC + TFC

Q: Your uncle is thinking about to open a fish & chips restaurant. He estimated that it would cost…

A: In economics, explicit cost is the direct cost of choosing an alternative and make expenditure on…

Q: “A firm that earns only normal profit is not covering all its costs.” Do you agree or disagree?

A: Economic Cost consists of explicit cost and implicit cost. In other words it consists of sum of…

Q: Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100…

A: ANS Profit is given by subtracting Total Cost (TC) from Total Revenue (TR). Mathematically it is…

Q: Discuss the relationship, with the use of a graphical illustration(virtual), of the firm's total…

A: According to the law of diminishing marginal returns, every production process will eventually reach…

Q: Show the effect of diminishing returns on the marginal and average cost curves of a firm in the…

A: diminishing returns is a financial regulation expressing assuming one contribution to the…

Q: Define the term Unit-Profit?

A: The profit that is earned per unit of the output is known as Unit-Profit. Clearly, the profit that a…

Q: Compare marginal revenue, marginal cost, and marginal revenue product.

A: The concepts of marginal revenue, marginal cost and the marginal revenue product are used by the…

Q: If marginal profit is $33 and marginal revenue is $80 What's the value of Marginal cost

A: The data presented in the question is:- Marginal profit of the firm = $33 Marginal revenue = $80…

Q: Q9. A firm sold 20,000 SD cards at $50 each in the previous year. The firm also spent $600,000 on…

A: Sales = 20,000 SD card @ 50 each Labour Cost = 6,00,000 Capital Equipment = 50,000 Raw material =…

Question

Define and explain the differences between accounting profit and economic profit.

Expert Solution

Step 1

Firms earn revenue with the help of the sale of the products that it produces. On the other hand, it incurs many costs in the form of the price paid for the use of factors of production and the various other kinds of costs

Step by step

Solved in 2 steps

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

According to the accompanying table, what quantity of output should the firm produce? Explain your answer.
What is the difference between Economic Profit and Accounting profit?
how does "Economic Profit" differs from the measurement of profit in other fields such as Accounting. How are costs measured in Economics?
Can economic profit ever exceed accounting profit? Explain.
Explain the difference between accounting and economic profit. Give two examples of when they differ.
Calculate economic and accounting profit, and explain the importanceof the difference.
The difference between economic profit and accounting profit is? Average cost Direct costs Economic costs Variable costs Marginal costs
Use your own example to clearly differentiate between an "accounting profit" and an "economic profit".
With the help of an example explain the difference between accounting and economic profit. Building on your answer then explains why a perfectly competitive firm would operate in the long run even if it makes 0 profit
Consider the concepts of accounting profit and economic profit. Suppose you are a consultant and you are meeting with a business owner who is trying to decide whether to keep that business open or open a business in a different industry. Discuss the differences between accounting profit and economic profit and why it should matters in this circumstance.
Explain using diagrams, the law of diminishing returns What is the difference between Economic Profit and Accounting Profit? Which is better to use in business analysis? At what point would a firm shut down its operations Define using diagrams Economies of Scale, Diseconomies of Scale, Constant Returns to scale
What is meant by normal profit?