Final answer:
A firm's accounting profit is calculated by subtracting explicit costs such as labor, capital, and materials from its total revenue. In the given example, with a revenue of $1 million and expenses totaling $950,000, the firm's accounting profit would be $50,000.
Step-by-step explanation:
The concept of accounting profit is represented by the total revenues minus the explicit costs, which are the direct costs of producing goods or providing services. For instance, if a firm had sales revenue of $1 million and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be calculated as follows:
Accounting profit = Revenue - (Labor Costs + Capital Costs + Materials Costs)
= $1,000,000 - ($600,000 + $150,000 + $200,000)
= $1,000,000 - $950,000
= $50,000
This demonstrates that the firm's accounting profit is $50,000 after subtracting all explicit costs from the total revenue.