Answer to Question #50506 in Microeconomics for marcha

Question

suppose that a firm produces 200 000units a year and sells them all for N$10 each. the explicit costs of production are N$1 500 000 and the implicit costs of production are N$300 000. what is the firms accounting profit and economic profit?

Answer 1

a) By the definition of the accounting profit we have:
Accounting profit=Total Revenue-Explicit Costs==Price×N_units-Explicit Costs=$10×200000-$1500000==$500000.
b) By the definition of the economic profit we have:
Economic profit=Accounting profit-Implicit Costs==$500000-$300000=$200000.
Answer:
The firms accounting profit is $500000 and the economic profit is $200000.