Given the information that follows, how much are (a) accounting profits and (b) economic profits? Sales, $750,000; explicit costs, $450,000; return you could have earned by investing your money elsewhere, $50,000; wages that you and your family members could have earned doing the same work for another firm, $70,000.
What will be an ideal response?
Sales ($750,000) - total costs ($450,000) = accounting profits ($300,000). Accounting profits ($300,000) - implicit costs ($50,000 + $70,000) = economic profit ($180,000).
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