A firm has $300 million in revenues and explicit costs of $100 million.If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year, the firm's accounting profit is:

Question

Quizplus · Accepted Answer

The accounting profit is calculated as total revenues minus explicit costs. Here, the accounting profit is $300 million (revenues) - $100 million (explicit costs) = $200 million. Opportunity costs are not considered in accounting profit.

A Firm Has $300 Million in Revenues and Explicit Costs