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 form her personal portfolio instead of investing the money and earning a 10% annual rate of return. The firm also operates out of a building they own worth $1,000,000 which the owner inherited 25 years ago.

1.The explicit costs of the firm are $______________.
2. If the owner could earn 15% annually on the money she has invested in the firm, the economic profit of the firm would be ______________ (when revenue is $450,000).
3. The implicit costs are $______________.
4. The firm's accounting profit is $______________.
5. The firm earns an economic profit of $______________.


Answer:

1. 100,000
2. 237,500
3. 75,000
4. 350,000
5. 275,000

Economics

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