EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 8, Problem 2QR
To determine
Describe the reason why the economic profit is a better measure of profitability than accounting profit.
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Students have asked these similar questions
What is the difference between Economic Profit and Accounting profit?
Use your own example to clearly differentiate between an "accounting profit" and
an "economic profit".
Tim 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?
Chapter 8 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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Similar questions
- 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_forwardHow do you define 'profit'?arrow_forwardWith the help of an example explain the difference between accounting and economic profit. Building on your answer then explains why a perfectly competitive firm would operate in the long run even if it makes 0 profitarrow_forward
- Are there fixed costs in the long-run? Explain briefly.arrow_forwardConsider the following information about a business Rodriguez opened last year: price = $5; quantity sold = 15,233; implicit cost = $18,000; explicit cost = $33,000. What was Rodriguez's accounting profit and economic profit? Show your work.arrow_forwardUse the graph above to answer these questions: What is the profit-maximizing level of output? What is the economic profit? What is the per-unit amount of profit at the profit-maximizing level of output?arrow_forward
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