<u>Answer: </u>7.1 92000
7.2 70000
7.3 30000
7.4 -40000
<u>Explanation:</u>
7.1 Explicit cost means the cost which occurs to meet the expenses for the business operations
The explicit cost is calculated below.
Wages and salaries 700000
Interest on bank loan 50000
Cost supplies 150000
Depreciation 20000
Total Explicit cost $920000
7.2 Implicit cost means the opportunity cost that is foregone by investing in other type of investment. Implicit cost is not incurred by the business actually.
Risk free return 30000
Risk premium 40000
Total Implicit cost $70000
*7.3 The difference between the cost and the revenue provides the accounting profit of the firm.
Accounting Profit
= Revenue - Explicit Cost
=950000 - 920000
Total accounting profit firm= $30000
7.4 Economic profit means the profit arrived by the firm after deducted the total of explicit and implicit cost.
Economic Profit
=Revenue - (Explicit Cost + Implicit Cost)
=950000 - (920000 + 70000)
Total Economic Loss incurred= $-40000
