Final answer:
The accounting profit is determined by subtracting explicit costs of labor, capital, and materials from total revenues; in this case, the firm's accounting profit is $50,000.
Step-by-step explanation:
The accounting profit of Fairfield, Inc. can be calculated by subtracting all explicit costs from the total revenues. When 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 formula would be:
Accounting Profit = Total Revenues - Explicit Costs
Accounting Profit = $1,000,000 - ($600,000 + $150,000 + $200,000)
Accounting Profit = $1,000,000 - $950,000
Accounting Profit = $50,000
Therefore, the accounting profit would be $50,000.