Final answer:
To find a firm's accounting profit, subtract the total explicit costs from the total revenues. In this case, the total revenues of $1 million minus the explicit costs of $950,000 (labor, capital, and materials) results in an accounting profit of $50,000.
Step-by-step explanation:
The question is related to the determination of a firm's accounting profit from its financial data. We can calculate the firm's accounting profit by subtracting the explicit costs from the total revenues. Following the example given, if a firm had sales revenue of $1 million last year and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the accounting profit would be calculated as follows:
- Total Revenue: $1,000,000
- Total Explicit Costs: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000
Therefore:
- Accounting Profit = Total Revenue - Total Explicit Costs
- Accounting Profit = $1,000,000 - $950,000
- Accounting Profit = $50,000
The firm's accounting profit would be $50,000.