Question

suppose that a business incurred implicit costs of $206,000 and explicit costs of $1 million in a specific year. if the firm sold 4,300 units of its output at $360 per unit, its accounting profits were

Answer 1

To find the accounting profit, the explicit costs of $1 million are subtracted from the total revenue of $1,548,000, resulting in an accounting profit of $548,000.

Step-by-step explanation:

Calculating Accounting Profits

To calculate the accounting profit for the business, we need to subtract the explicit costs from the total revenues. The given explicit costs are $1 million, and the total revenue can be calculated by multiplying the number of units sold by the price per unit. Thus, the total revenue equals 4,300 units times $360 per unit, which is $1,548,000.

Using the formula for accounting profit, which is:

Accounting Profit = Total Revenues - Explicit Costs

Substituting the given values gives us:

Accounting Profit = $1,548,000 - $1,000,000 = $548,000.

Therefore, the accounting profit of the firm is $548,000.