Question

Suppose a firm incurred explicit costs of $900 and implicit costs of $200 during a day. If that day the firm sold 8 units at $300 per unit its accounting profits are: $1,500 and its economic profits are:_______..a. $1,500 and its economic profits are $1,700.b. $1,300 and its economic profits are $1,300.c. $1,300 and its economic profits are $1,700. d. $1,500 and its economic profits are $1,300.

Answer 1

Answer:

d. $1,500 and its economic profits are $1,300.

Explanation:

The computation is shown below

For accounting profit, it is

= Total revenue - Explicit cost

where,

Total revenue is = 8 units × $300 per unit = $2,400

And, the explicit cost is $ 900

So, the accounting profit is

= $2,400 - $900

= $1,500

And, the economic profit is

= Total Revenue - explicit cost  - implicit cost

= $2,400 - $900 - $200

= $1,300

Simply applied the above formulas so that the both profits could arrive