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July 24, 2014

Homework Help: Economics

Posted by John on Thursday, September 3, 2009 at 10:50am.

During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expense, raw materials, rent, and utilities. The firm's owner has provided $750,000 of her own money instead of investing the money and earning a 10% annual rate of return.

What is the explicit opportunity cost of using market-supplied resources?
A. $100,000
B. $750,000
C. $75,000
D. $175,000


Using the same facts as Question 1:

What is the total economic cost?
A. $100,000
B. $750,000
C. $175,000
D. $75,000



Using the same facts as Question 1:

What is the firm's economic profit?
A. $450,000
B. $275,000
C. $300,000
D. $350,000




Using the same facts as Question 1:

What is the firm's accounting profit?
A. $300,000
B. $350,000
C. $275,000
D. $0




Using the same facts as Question 1, except assume the owner could earn 15% annually on the money she has invested in the firm:

What is the economic profit of the firm? (When revenue is $450,000)
A. $0
B. $350,000
C. $237,500
D. $75,000

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