Bundle: Managerial Economics, Loose-leaf Version, 4th + Aplia, 1 term Printed Access Card for Traditional Economics
Bundle: Managerial Economics, Loose-leaf Version, 4th + Aplia, 1 term Printed Access Card for Traditional Economics
4th Edition
ISBN: 9781337551564
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 3, Problem 1MC
To determine

Calculate the accounting profit.

Expert Solution & Answer
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Explanation of Solution

Accounting profit refers to the excess revenue after subtracting the total cost from the total revenue. The revenue can be calculated as follows:

Revenue=1000×15×30=450000

Thus, the revenue is $450000. The explicit cost is given as $150000. Therefore, the accounting profit can be calculated as follows:

Accounting profit=RevenueExplicit cost=450000150000=300000

The accounting profit of the firm is equal to $300000. Thus, option ‘a’ is correct.

Economics Concept Introduction

Accounting profit: Accounting profit refers to the excess revenue after subtracting the total cost from the total revenue. 

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