Suppose that during a given time period the implicit cost for a business was $1,500 and that the explicit cost was $6,000. Also suppose that the firm sold 1,000 units of its products at $7 per item. We can conclude that the firm's

Question

Quizplus · Accepted Answer

The accounting profit is calculated by subtracting explicit costs from revenue:

Revenue = (1,000 units sold) x ($7 per unit) = $7,000
Accounting Profit = Revenue - Explicit Costs = $7,000 - $6,000 = $1,000

The economic profit is calculated by subtracting both explicit and implicit costs from revenue:

Economic Profit = Revenue - Explicit Costs - Implicit Costs
Economic Profit = $7,000 - $6,000 - $1,500 = -$500

Therefore, the accounting profit was $1,000 and the economic profit was -$500. The correct answer is A.

Suppose That During a Given Time Period the Implicit Cost