Managerial Economics Question

1)The Midnight hour, a local
nightclub, earned \$100,000 in
accounting profit last year. This
year the owner, who had invested \$ 1
million in the club, decided to
close the club. What can you say
about economic profit (and the rate
Economic Profit = TR(total revenue)-
TC(total economic cost)
EP = \$100,000 - \$1,000,000
EP = -\$900,000

Since EP is a negative number the
firm should shut down, the output is
not positive, therefore the company
operates at a loss, the manager
needs to determine how long they
want to continue with this loss
process.
Does this sound like the correct

Thanks,
EY

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