Production Help Save&ExitSub; You received no credit for this question in the pr
ID: 1143927 • Letter: P
Question
Production Help Save&ExitSub; You received no credit for this question in the previous attlempt Harvey quit his job at State University where he eamed $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial inconse to be $5,000 a year To start the business, he cashed in $100.000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year the fiem sold 11,000 units of software at $75 each Of the $75. 555 goes for the costs of production packaging, marketing, employee wages and benefits, and rent on a building What is the economic profit generated by Extreme Gaming in the first year? Mutiple Choice $155,000Explanation / Answer
1) Solution: $160,000
Working:
Opportunity cost
Job
45,000
foregone entrepreneurial income
5,000
Interest
10,000
60,000
Accounting profit
Sales: 11,000 *75
825000
Expenses: 11,000 * 55
605000
Difference is accounting profit
220000
Economic Profit:
Accounting profit
220,000
Opportunity cost
60,000
Difference is economic profit
160,000
2) The main difference between the short run and the long run is that
Solution: In the short run, some inputs are fixed and some are variable
Explanation: In the short run, one or more inputs is fixed
3) Which of the following would be an implicit cost for a firm?
Solution: The cost: Of wages foregone by the owner of the firm
Explanation: An implicit cost refers to the cost that has already occurred however not necessarily reported as a separate expense.
Opportunity cost
Job
45,000
foregone entrepreneurial income
5,000
Interest
10,000
60,000
Accounting profit
Sales: 11,000 *75
825000
Expenses: 11,000 * 55
605000
Difference is accounting profit
220000
Economic Profit:
Accounting profit
220,000
Opportunity cost
60,000
Difference is economic profit
160,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.