What is the difference between accounting profit and economic profit?
a. They are the same thing.
b. They are only different if the accountant makes a mistake.
c. Accounting profit is usually smaller than economic profits.
d. Accounting profit makes no allowance for several implicit costs, including equity capital, while economic profit takes these costs into account.
D
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Refer to the information below. The economic profits of Harvey's firm in the first year were:
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. A. $155,000 B. $160,000 C. $220,000 D. $280,000
If firms differ in terms of their technologies, a drop in demand will cause a long run decrease in output price.
Answer the following statement true (T) or false (F)