Asked by
Torie Pollard
on Nov 25, 2024
Verified
The sole proprietor of the Milwaukee Machine Company receives all accounting profits earned by her firm. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates that would have returned $22,000 this year. If accounting profits for the year were $50,000, then her economic profits were (based solely on the given figures)
A) $107,000.
B) $−7,000.
C) $57,000.
D) $50,000.
Accounting Profits
The profit or loss recorded on a company's financial statements, calculated as revenues minus expenses and taxes.
Economic Profits
The difference between total revenue and total costs, considering both explicit and implicit costs.
Salary Offer
The amount of pay or compensation that an employer is willing to give an employee for their work.
- Set apart economic profits, accounting profits, and normal profits, and evaluate them utilizing explicit and implicit costs.
- Understand the concept of opportunity costs and their relevance in calculating economic profits.
Verified Answer
AJ
Learning Objectives
- Set apart economic profits, accounting profits, and normal profits, and evaluate them utilizing explicit and implicit costs.
- Understand the concept of opportunity costs and their relevance in calculating economic profits.