Accounting profit and economic profit.

Question

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Answer 1

Question

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Accounting profit: Accounting profit refers to the total revenue minus total explicit cost

Economic profit: Economic profit refers to the total revenue minus implicit and explicit cost.

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Students have asked these similar questions

At the 8:10 café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (that is she cannot price discriminate). Students with early classes Students without early classes Coffee 70 60 Banana 50 100 The MC of coffee is 10. The MC of a banana is 40. Is bundling more profitable than selling separately? HINT: if you sell the bundle, can you make more by offering coffee separately? If so, what price should be charged for the bundle? (Show calculations)

Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Use the following demand data: Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40%

Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40% ur marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000.

Answer 2

Question

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Accounting profit: Accounting profit refers to the total revenue minus total explicit cost

Economic profit: Economic profit refers to the total revenue minus implicit and explicit cost.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Accounting profit: Accounting profit refers to the total revenue minus total explicit cost

Economic profit: Economic profit refers to the total revenue minus implicit and explicit cost.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Accounting profit: Accounting profit refers to the total revenue minus total explicit cost

Economic profit: Economic profit refers to the total revenue minus implicit and explicit cost.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Accounting profit: Accounting profit refers to the total revenue minus total explicit cost

Economic profit: Economic profit refers to the total revenue minus implicit and explicit cost.

Answer 6

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Accounting profit: Accounting profit refers to the total revenue minus total explicit cost

Economic profit: Economic profit refers to the total revenue minus implicit and explicit cost.

Answer 7

Chapter 13, Problem 1CQQ

To determine

Accounting profit and economic profit.

Answer 8

Expert Solution & Answer

Answer to Problem 1CQQ

Option ‘a’ is correct.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (a):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (Total revenue−Total explicit cost) (total revenue – total explicit cost) $50($60−$10). Economic profit is (Total revenue−(Implicit cost +Explicit cost)) $10 ($60−($50+$10)) . Therefore, the value of accounting profit is $50 and the economic profit is $10.

Option (b):

Xavier accounting profit is not $90, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is total revenue minus implicit and explicit cost. Thus, option ‘b’ is incorrect.

Option (c):

When Xavier spends $10 for ingredients and sells $60 worth of lemonade, Xavier accounting profit will not be $10, because an accounting profit is the total revenue minus the total explicit cost. Economic profit is not $50, because economic profit is the total revenue minus implicit and explicit cost. Thus, option ‘c’ is incorrect.

Option (d):

When Xavier spend $10 for ingredients and sell $60 worth of lemonade, then the accounting profit will be (total revenue – total explicit cost) $50($60−$10) . But the economic profit is not $90, because the economic profit is (Total revenue−(Implicit cost +Explicit cost)) . Thus, option ‘d’ is incorrect.