EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 8, Problem 1RQ
To determine
State some reasons for any firm to be concerned about its economic profits, and also about the
Expert Solution & Answer
Answer to Problem 1RQ
The accounting profits allow the firms to pay for their taxes and dividends from their surpluses, on the other hand, the economic profits imply that firm is able to utilize the resources available in a proper and optimum manner.
Explanation of Solution
While the profits from accounting determine the taxes and dividends, the economic profits imply that the factors employed in the firm are properly utilized in production.
This means that when the factors employed are not properly utilized in the production process the company automatically experiences deterioration in its economic profits, and thereby affecting its production capabilities.
Economics Concept Introduction
Introduction: According to the utility maximization concept, it is assumed that the consumer decides to spend each and every penny of his available income on the products that he believes yields the maximum
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Students have asked these similar questions
Mike spends RM35,000 per annum on painting supplies and storage space. He recently received two job offers from a famous marketing firm – one offer was for RM 95,000 per year, and the other was for RM 105,000. However, he turned both jobs down to continue a painting career. If Mike sells 20 paintings per year at a price of RM 8,000 each:
Question 1: What are his accounting profits?
Question 2: What are his economic profits?
What costs and revenues do economists include when calculating profit that accountants don’t include?
Economists and accountants calculate profit with the same costs and revenues. The only difference is that economists work with predicted costs and revenues for the future, whereas accountants work with costs and revenues from previous years.
In addition to the explicit costs and revenues used by accountants, economists include all implicit costs and revenues when calculating profit. This means that they include opportunity costs and changes in the value of any assets owned by the firm.
In addition to the implicit costs and revenues used by accountants, economists include all explicit costs and revenues when calculating profit. This means that they include labor costs and changes in the value of any assets owned by the firm.
In addition to the explicit costs and revenues used by accountants, economists include all implicit costs and revenues when calculating…
Consider a firm that uses capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. Also assume that total labor costs to the firm are $45,000 annually. Assume further that the total capital stock of the firm is currently worth $100,000, that the return available to investors with comparable risks is 10 percent annually, and that there is no depreciation. Calculate the economic profit and accounting profit of this firm? Explain your answer.?
Chapter 8 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 8.3 - Prob. 1MQCh. 8.3 - Prob. 2MQCh. 8.3 - Prob. 1.1MQCh. 8.3 - Prob. 2.1MQCh. 8.4 - Prob. 1TTACh. 8.4 - Prob. 2TTACh. 8.4 - Prob. 1MQCh. 8.4 - Prob. 2MQCh. 8.5 - Prob. 1TTACh. 8.5 - Prob. 2TTA
Ch. 8.5 - Prob. 1.1TTACh. 8.5 - Prob. 2.1TTACh. 8.5 - Prob. 1MQCh. 8.5 - Prob. 2MQCh. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQCh. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Prob. 8.5PCh. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10P
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