What is the difference between economic profit and accounting profit?
What will be an ideal response?
Economic profits equal total revenue minus explicit and implicit costs. Accounting profit equals total revenue minus explicit costs only. The difference between economic profit and accounting profit is therefore implicit costs.
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Jake sells Star Wars memorabilia on eBay. His annual revenue is $42,000 per year, and the explicit costs of his business are $10,000. What is his accounting profit?
A) $10,000 B) $22,000 C) $32,000 D) $42,000
The federal government increases spending by $50 billion, and the main effect is an increase in the price level. It must be true that the economy is operating on the
A. horizontal portion of the aggregate demand curve. B. horizontal portion of the aggregate supply curve. C. vertical portion of the aggregate supply curve. D. vertical portion of the aggregate demand curve.