Given the following information that includes all costs of the firm, we know that: $$\begin{array} {| l | r| }
\hline \text { Value of final sales } & \$ 1,000 \
\hline \text { Rent } & \$ 200 \
\hline \text { Compensation to employees } & \$ 500 \
\hline \text { Interest } & \$ 500 \
\hline
\end{array}$$

Question

Given the following information that includes all costs of the firm, we know that: $$\begin{array} {| l | r| } 
\hline \text { Value of final sales } & \$ 1,000 \
\hline \text { Rent } & \$ 200 \
\hline \text { Compensation to employees } & \$ 500 \
\hline \text { Interest } & \$ 500 \
\hline
\end{array}$$

Quizplus · Accepted Answer

CProfit is calculated as the difference between the value of final sales and the total costs. Here, the total costs include rent ($200), compensation to employees ($500), and interest ($500), summing up to $1,200. Since the value of final sales is $1,000, the firm is operating at a loss of $200 ($1,000 - $1,200 = -$200), which supports choice A. Additionally, this loss must be subtracted from final sales to align income with output, supporting choice C.

Given the Following Information That Includes All Costs of the Firm