Philip owns and operates a gas station. Philip works 40 hours a week managing the station...

 

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Philip owns and operates a gas station. Philip works 40 hours a week managing the station but doesn't draw a salary. He could earn $800 a week doing the same work for Terrance. The station owes the bank $100,000 and Philip has invested $100,000 of his own money. If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $300 per week, what are the business's economic profits? Philip owns and operates a gas station. Philip works 40 hours a week managing the station but doesn't draw a salary. He could earn $800 a week doing the same work for Terrance. The station owes the bank $100,000 and Philip has invested $100,000 of his own money. If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $300 per week, what are the business's economic profits?

Answer rating: 100% (QA)

To calculate the businesss economic profits we need to consider all costs both explicit and implicit ... View the full answer