Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a
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Question:
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:
A. profits were $100,000 and its economic profits were zero.
B. losses were $500,000 and its economic losses were zero.
C. profits were $500,000 and its economic profits were $1 million.
D. profits were zero and its economic losses were $500,000.
Total revenue was 100,000 * $50 = $5,000,000 and explicit costs were also $5,000,000. So the firm lost its implicit costs for an economic loss of $500,000.
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Small Business Management Launching and Growing New Ventures
ISBN: 978-0176532215
6th Canadian edition
Authors: Justin Longenecker, Leo Donlevy, Terri Champion, William Petty, Leslie Palich, Frank Hoy
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