Question

For each answer below, enter your answer below in terms of millions of dollars (e.g., write 2 for $2,000,000). Round to the nearest dollar and don’t forget a negative sign if necessary!

Suppose a bank's total revenues are $35 million, its explicit costs are $20 million, implicit costs are $10 million, and its accounting profit is $5 million. What is the economic profit for the bank?

A) $5 million

B) $15 million

C) $25 million

D) $15 billion

Answer 1

The economic profit for the bank is $5 million.

Step-by-step explanation:

To calculate the economic profit for the bank, you need to subtract both the explicit costs and implicit costs from the total revenues. The equation is: Economic profit = Total revenues - Explicit costs - Implicit costs. In this case, the economic profit is $35 million - $20 million - $10 million = $5 million. Therefore, the correct answer is A) $5 million.