Economic profits-normal profits and accounting profits

Assignment Help Business Economics

Reference no: EM13774256

1. (SLO 3) Suppose that you leave a job that pays $40,000/year and use $10,000 of your savings that had been earning $500/year in interest in order to start your own business. In your business, you sell 450 units at $60/unit while paying $12,000 for capital cost and $12,000 for labor cost. Assume there are no other costs than those mentioned here. How much is economic profit?

A) - $13,000

B) $3000

C) $26,500

D) - $37,500

E) - $47,500

2. Which of the following statements about the relationship between economic profits, normal profits and accounting profits is true?

A) Accounting profits are always lower than economic profits.

B) Accounting profits must equal economic profits (by definition).

C) Accounting profits are always greater than normal profits.

D) Accounting profits are equal to or greater than economic profits.

Reference no: EM13774256

Questions Cloud

About a lingering recession : In 1992, thirst Bush administration was worried about a lingering recession. The administration announced that households would receive a reduction in their taxes for the year 1992. However, this was not accompanied by a reduction in tax rates, and t..

How much interest will be paid over the term of the loan : The selling price of a house is $1,375,000. You have enough money for a 15% down payment with the balance authorized at 4% annual compounded monthly for 30 years. How much will the monthly payments be? How much interest will be paid over the term of ..

What is the future worth of equal quarterly payment series : What is the future worth of an equal quarterly payment series of $2500 for 10 years if the annual interest rate is 9% compounded monthly?

How low much a quota be to have an impact on trade : How low much a quota be to have an impact on trade? Using a demand -and -supply diagram, illustrate and explain the net welfare loss from imposing such a quota. Under what circumstances would the net welfare loss from an import quota exceed the net w..

Economic profits-normal profits and accounting profits : Suppose that you leave a job that pays $40,000/year and use $10,000 of your savings that had been earning $500/year in interest in order to start your own business. In your business, you sell 450 units at $60/unit while paying $12,000 for capital cos..

Administration was worried about a lingering recession : In 1992, thirst Bush administration was worried about a lingering recession. The administration announced that households would receive a reduction in their taxes for the year 1992. However, this was not accompanied by a reduction in tax rates, and t..

Affect short-run interest rates and output : Using IS-LM analysis show graphically and explain how a liquidity trap affects the Fed’s ability to use conventional monetary policy to affect short-run interest rates and output.

Explain how long-lags in effectiveness of monetary policy : Show graphically and explain how long-lags in the effectiveness of monetary policy have the potential to lead to acceleration in the inflation rate. (Assume that the economy is in a recession when the Fed enacts the monetary policy change.)

Methods of securing arbitration : In response to such events as the Cuyahoga River fire and a 250 million gallon crude oil spill of the coast of Santa Barbara, California, Congress passed which Act in the 1960s?

User Account

All Pages