The following table shows the annual income statement of Max Computers. Table 8.3
Refer to Table 8.3.The economic profit of Max Computers is:
A)$1, 000 million.
B)-$4, 000 million.
C)$10, 000 million.
D)-$5, 000 million.
E)$5, 000 million.

Question

The following table shows the annual income statement of Max Computers. Table 8.3
 Refer to Table 8.3.The economic profit of Max Computers is:
A)$1, 000 million. 
B)-$4, 000 million. 
C)$10, 000 million. 
D)-$5, 000 million. 
E)$5, 000 million.

Quizplus · Accepted Answer

Economic profit is calculated as total revenues minus total explicit and implicit costs. From the given table, we can see that Max Computers had a total revenue of $50 billion, explicit costs of $40 billion ($20 billion for wages and salaries, $10 billion for raw materials, and $10 billion for other expenses), and implicit costs of $14 billion (the opportunity cost of using the owner's personal savings). Therefore, the economic profit is $50 billion - ($40 billion + $14 billion) = -$4 billion.

The Following Table Shows the Annual Income Statement of Max