Question

If explicit costs equal $157,000, implicit costs equal $95,000, and accounting profit equals $23,000, it follows that total revenue equals conomic profit equals ____a. 75,000; 517,000 b. 5180,000; -$72,000 c. $68,000; $25,000 d. 5118,000; -572,000 e. There is not enough information given to answer this question

Answer 1

To calculate economic profit, subtract explicit and implicit costs from total revenue. In this case, the economic profit is -$229,000.

Step-by-step explanation:

To calculate economic profit, you need to subtract both explicit and implicit costs from total revenue. In this case, explicit costs equal $157,000 and implicit costs equal $95,000. Accounting profit equals $23,000. Therefore, economic profit would be $23,000 - $157,000 - $95,000 = -$229,000. So, the correct answer is option d.

Answer 2

The total revenue is calculated to be $180,000 by adding the explicit costs back to the accounting profit. The economic profit is determined to be -$72,000 by subtracting both explicit and implicit costs from total revenue. The correct answer is option b. $5180,000; -$72,000.

Step-by-step explanation:

To determine the economic profit, we need to subtract both explicit and implicit costs from total revenue. Given that accounting profit equals total revenue minus explicit costs, we can derive total revenue by adding the explicit costs back to the accounting profit. The formula would be as follows:

Accounting Profit = Total Revenue - Explicit Costs

$23,000 = Total Revenue - $157,000

Total Revenue = $23,000 + $157,000

Total Revenue = $180,000

Now, we can calculate the economic profit by subtracting both types of costs from total revenues

Economic Profit = Total Revenue - Explicit Costs - Implicit Costs

Economic Profit = $180,000 - $157,000 - $95,000

Economic Profit = -$72,000

So, the economic profit is -$72,000, and the total revenue is $180,000. The correct answer is option b. $5180,000; -$72,000.