Question

Suppose that a firm earned​ $500,000 in total revenue. At the same​ time, it incurred labor costs of​ $200,000; economic depreciation of​ $50,000; normal profit of​ $75,000; interest paid to the bank of​ $25,000; and used other factors of production that cost​ $100,000. The economic profit earned by the firm equals:

Answer 1

Answer: $50,000

Explanation:

Given the following ;

Total Revenue = $500,000

Labor cost = $200,000

Economic Depreciation = $50,000

Normal profit = $75,000

Interest paid to bank = $25,000

Other cost of production = $100,000

Economic profit = (Total revenue - labor cost - economic Depreciation - normal profit - interest paid to bank - other production cost))

Economic profit =$ (500,000 - 200,000 - 50,000 - 75,000 - 25,000 - 100,000)

Economic profit = $50,000