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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Evaluate machine XYZ when MARR is 12% per year. Pertinent data are as follows: Machine XYZ Investment cost Expected life Market (salvage) value Annual revenue Annual expenses $10,000 5 years $1,000 $8,000 $4,000 How much is the excess of the cash flow using the Annual Worth Method? Blank 1 Calculate the External Rate of Return. Blank 2 Compute the payback period of the investment. Blank 3 Would you recommend this investment? Explain briefly. Blank 4

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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.

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 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.

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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.