1-2 Economic profita.is a theoretical measure of a firm’s performance and has little value in real world decision making.b.can be calculated by subtracting implicit costs of using owner-supplied resources from the firm’s total revenue.c.is negative when total costs exceed total revenues.d.is generally larger than accounting profit.
Question
1-2 Economic profita.is a theoretical measure of a firm’s performance and has little value in real world decision making.b.can be calculated by subtracting implicit costs of using owner-supplied resources from the firm’s total revenue.c.is negative when total costs exceed total revenues.d.is generally larger than accounting profit.
Solution
The question seems to be asking for the correct statement about economic profit. Let's go through each option:
a. Economic profit is not just a theoretical measure. It is a real measure that takes into account both explicit and implicit costs. It is used in real world decision making to determine the true profitability of a business. So, this statement is not correct.
b. This statement is correct. Economic profit is calculated by subtracting both explicit and implicit costs from a firm's total revenue. Implicit costs include the opportunity costs of using owner-supplied resources.
c. This statement is also correct. If a firm's total costs (including both explicit and implicit costs) exceed its total revenues, then it is making a negative economic profit.
d. This statement is generally not correct. Economic profit is usually smaller than accounting profit because it takes into account implicit costs, which are not included in the calculation of accounting profit.
So, the correct answers are b and c.
Similar Questions
1-3 Economic profit is the difference betweena.total revenue and the opportunity cost of all of the resources used in production.b.total revenue and the implicit costs of using owner-supplied resources.c.accounting profit and the opportunity cost of the market-supplied resources used by the firm.d.accounting profit and explicit costs.
Economic profits are calculated by subtracting:Group of answer choicesimplicit costs from total revenue.explicit costs from total revenue.explicit and implicit costs from total revenue.implicit costs from normal profits.
economic profit would be equal to accounting profit whenedit
A firm’s economic profit is always less than its accounting profit becauseGroup of answer choiceseconomic profit is always zero, no matter what kind of firm it is.accounting profit considers explicit costs, which economic profit does not.economic profit considers implicit costs, which accounting profit does not.accounting profit considers implicit costs, which economic profit does not.accounting profit is always positive, no matter what kind of firm it is.
It is also known as economic profit for its attempts to capture the true economic profit of a company.a.Economic Value Addedb.Weighted Average Cost of Capitalc.Weighted Average Cost of Assetsd.Ergonomic Value Added
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