Asked by
Piyush Lalwani
on Dec 01, 2024
Verified
Philip owns and operates a gas station.Philip works 40 hours a week managing the station but doesn't draw a salary.He could earn $800 a week doing the same work for Terrance.The station owes the bank $100,000 and Philip has invested $100,000 of his own money.If Philip's accounting profits are $1,000 per week while the interest on his bank debt is $300 per week, the business's economic profits are
A) -$100 per week.
B) $200 per week.
C) $0 per week.
D) $700 per week.
E) $1,000 per week.
Opportunity Cost
The loss of potential gain from other alternatives when one option is chosen.
Accounting Profits
The difference between total revenue and explicit costs of a business, calculated using principles of accounting.
Economic Profits
The surplus left after total costs (including both explicit and implicit costs) are subtracted from total revenues.
- Gain an understanding of how to maximize profits in diverse business situations.
- Understand the distinction between economic and accounting profit.
Verified Answer
YE
Learning Objectives
- Gain an understanding of how to maximize profits in diverse business situations.
- Understand the distinction between economic and accounting profit.