Calculating Accounting Profit from Revenues

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Question:

If a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its accounting profit is:

$50. $500. $0. $100.

Answer:

To calculate the accounting profit, we use the formula:

[ \text{Accounting Profit} = \text{Total Revenues} - \text{Explicit Costs} ]

Given:

  • Total Revenues = $125
  • Explicit Costs = $25

Now, substituting the values into the formula:

[ \text{Accounting Profit} = 125 - 25 = 100 ]

Therefore, the accounting profit is $100.