Question

If a firm's explicit costs are $2,000, its implicit costs are $1,000, and its revenue is $5,000, the firm is earning (2 points)

positive accounting profit of $2,000
negative accounting profit of $2,000
positive economic profit of $3,000
positive economic profit of $2,000
positive economic profit of $4,000

Answer 1

Answer: positive economic profit of $2,000

Step-by-step explanation:

when you combine both explicit costs and implicit costs you are going to get the economic profit. the accounting profit is gotten by only measuring the explicit cost. Add the revenue and you get the answer.

Answer 2

The firm's total costs are $3,000 ($2,000 explicit costs + $1,000 implicit costs), and its revenue is $5,000. Therefore, the firm's accounting profit is $2,000 ($5,000 - $3,000). However, to calculate the economic profit, we need to subtract the opportunity cost of the resources used, including the implicit costs. Since the implicit costs are already included in the total costs, the economic profit is zero.

Therefore, the firm is earning a positive accounting profit of $2,000, but zero economic profit. The correct answer is "positive accounting profit of $2,000".