If revenues are $50,000, explicit costs are $40,000 and implicit costs are $10,000, then accounting and economic profit are, respectively:
A) $0 and $10,000.
B) $0 and $40,000.
C) $10,000 and $0.
D) $10,000 and $40,000.

Question

Quizplus · Accepted Answer

Accounting profit is calculated by subtracting explicit costs from revenues, which is $50,000 - $40,000 = $10,000. Economic profit subtracts both explicit and implicit costs from revenues, which is $50,000 - ($40,000 + $10,000) = $0.

If Revenues Are $50,000, Explicit Costs Are $40,000 and Implicit