Question

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:
a. profits were $100,000 and its economic profits were zero.
b. losses were $500,000 and its economic losses were zero.
c. profits were $500,000 and its economic profits were $1 million.
d. profits were zero and its economic losses were $500,000.

Total revenue was 100,000 * $50 = $5,000,000.00 and explicit costs were also $5,000,000. So the firm lost its implicit costs for an economic loss of $500,000.

Answer 1

Answer: d.) profits were zero and its economic losses were $500,000.

Explanation: