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:

Question

Quizplus · Accepted Answer

Accounting profit is calculated as revenue minus explicit costs, which in this case is:
$5,000,000 - ($50 x 100,000) = $0
Economic profit takes into account implicit costs as well, which in this case is:
$0 - $500,000 = -$500,000
Therefore, the firm had zero accounting profit and economic losses of $500,000. This is represented by answer choice D.

Suppose That a Business Incurred Implicit Costs of $500,000 and Explicit