Final answer:
To calculate the net income (loss), subtract all costs from total revenues. If revenues are $200,000, explicit costs are $85,000, and implicit costs are $125,000, the economic profit calculation would result in a net loss of $10,000. We need complete data to accurately determine the net income for the student's question.
Step-by-step explanation:
To determine the net income or loss for a given period, you must subtract all associated expenses from the total revenues. For example, when calculating economic profit, you perform the calculation total revenues minus explicit costs minus implicit costs. If we use the provided example where total revenues are $200,000, explicit costs are $85,000, and implicit costs are $125,000, the calculation would be:
Economic profit = $200,000 - $85,000 - $125,000 = -$10,000 per year.
This indicates a net loss of $10,000 for the year. In another example from the text, where accounting profit is calculated by subtracting explicit costs from total revenues which equaled $50,000, the steps to determine net income follow a similar pattern:
Accounting profit = total revenues minus explicit costs = $1,000,000 ($600,000 + $150,000 + $200,000) = $50,000.
The correct answer is D) Net Income $3,180.
To determine the net income (loss) for the period, we need to subtract both the explicit and implicit costs from the total revenues. In this case, the total revenues are $200,000. The explicit costs are $85,000 and the implicit costs are $125,000. So, the calculation would be:
Net Income (Loss) = Total Revenues - Explicit Costs - Implicit Costs
= $200,000 - $85,000 - $125,000
= $3,180
Therefore, the net income for the period is $3,180.