Question

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: Group of answer choices zero and its economic loss was $200,000. $100,000 and its economic profits were $100,000. $100,000 and its economic profits were zero. $200,000 and its economic profits were zero.

Answer 1

Answer: $200,000 and its economic profits were zero.

Explanation:

First and foremost, we should note that when calculating accounting profit, the implicit cost isn't taken into consideration.

Therefore, the accounting profit will be:

= Revenue - Explicit Cost

= (4000 × 300) - Explicit cost

= 1,200,000 - 1,000,000

= 200,000

Then, Economic Profit will be:

= Accounting profit - Implicit cost

= 200,000 - 200,000

=0

Therefore, its its accounting profits were $200,000 and its economic profits were zero.