Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 23, Problem 14E
To determine
To discuss:
The importance of theaccounting profit and the economic profit.
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Complete the sentences to illustrate how economists and accountants view profit differently.
Economic profit is:
A. typically lower than accounting profit.
B. always zero.
C. typically higher than accounting profit.
how does "Economic Profit" differs from the measurement of profit in other fields such as Accounting. How are costs measured in Economics?
How do the concepts of accounting profit and economic profit differ? Why is economic profit smaller than accounting profit? What are the three basic sources of economic profit? Classify each of the following according to those sources:a. A firm’s profit from developing and patenting a new medication that greatly reduces cholesterol and thus diminishes the likelihood of heart disease and stroke.b. A restaurant’s profit that results from the completion of a new highway past its door.c. The profit received by a firm due to an unanticipated change in consumer tastes.
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Similar questions
- Distinguish among accounting profit, economic profit, and normal profit. Does accounting profit or economic profit determine how entrepreneurs allocate resources between different business ventures? Explain.arrow_forwardDistinguish between accounting profit, economic profit, and normal profit. Does accounting profit or economic profit determine how entrepreneurs allocate resources between different business ventures? Explain.arrow_forwardWhat is the difference between Economic Profit and Accounting profit?arrow_forward
- Why do economists believe that economic profit is the more accurate measure of a business success? Why is economic profit the superior method of determining a business success?arrow_forwardGeorgia quit her old job where she had been earning $50,000 a year to start her own business. She also invested all her savings into the business, which had been earning $10,000 a year in interest. At the end of her first year, Georgia's accountant told her she had made $70,000 in accounting profit. An economist would have told her she made an economic profit of: of Select one: a. $10,000 b. zero c. - $15,000 d. $20,000arrow_forwardTim is thinking of opening a garment store. He estimates that it would cost $270000 per year to rent the location and buy the merchandise. In addition, he would have to quit his $63000 per year day job. Tim estimates he can sell $315600 worth of garments in a year. a. What will be the accounting profit and economic profit for Tim? b. If you are an economist, should you suggest opening the store? Why?arrow_forward
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