Economan has been infected by the free enterprise bug. He sets up a firm on extr

Question

Economan has been infected by the free enterprise bug. He sets up a firm on extraterrestrial affairs. The rent of the building is $9,000, the cost of the two secretaries is $41,000, and the cost of electricity and gas comes to $5,000. There’s a great demand for his information, and his total revenue amounts to $100,000. By working in the firm, though, Economan forfeits the $50,000 he could earn by working for the Friendly Space Agency and the $3,000 he could have earned as interest had he saved his funds instead of putting them in this business.

a. What is his profit or loss by an accountant’s definitions?

Instructions: Round your answer to the nearest whole dollar and use a (-) if the number is negative.

Accounting profit is $.


b. What is his profit or loss by an economist’s definitions?

Instructions: Round your answer to the nearest whole dollar and use a (-) if the number is negative.

Economic profit is $.

Explanation / Answer

a. What is his profit or loss by an accountant’s definitions?

Instructions: Round your answer to the nearest whole dollar and use a (-) if the number is negative.

Accounting profit is $.(TR - TC) = ($100,000 - ($9,000 + $41,000 + $5,000)) = $45000

Economic profit is $.(he is loosing 53000 (oppotunity cost)) Therefore economic loss of : $8000

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