Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year.If the store earned an economic profit of $50,000 last year,this means that the store's accounting profit equaled:
A)$94,000.
B)$6,000.
C)$2.05 million.
D)$2.044 million.

Question

Quizplus · Accepted Answer

Accounting profit equals total revenue minus explicit costs. Therefore, accounting profit for the store would be $2.05 million in revenue minus $2 million in explicit costs, which equals $50,000. Adding the implicit costs to the accounting profit gives us the economic profit, which is $50,000 + $44,000 = $94,000.

Suppose a Local Hardware Store Has Explicit Costs of $2