Final answer:
The firm's accounting profit is calculated by subtracting the explicit costs of labor, capital, and materials from its sales revenue. With a revenue of $1 million and total costs of $950,000, the accounting profit is $50,000.
Step-by-step explanation:
To calculate a firm's accounting profit, you need to subtract the firm's explicit costs from its revenues. Explicit costs are direct payments made to others in the course of running a business, like labor, material costs, and capital expenses.
Calculating Accounting Profit
Given that the firm's sales revenue was $1 million and the expenses were as follows:
- Labor costs: $600,000
- Capital costs: $150,000
- Materials costs: $200,000
The total explicit costs would be the sum of labor, capital, and materials, which is $600,000 + $150,000 + $200,000 = $950,000.
Subtracting the explicit costs from the revenue:
$1,000,000 - $950,000 = $50,000
Therefore, the firm's accounting profit for the last year is $50,000.