Given the information that follows, how much is the Foley family business's (a) accounting profits? (b) Economic profits? Sales: $4 million; total costs: $3.7 million; return they could have earned elsewhere: $80,000; wages the family members could have earned doing the same work for another firm: $250,000.
What will be an ideal response?
Total revenue ($4,000,000) - Total cost ($3,700,000) = Accounting profit ($300,000) - Implicit cost ($80,000 + $250,000) = Economic profit (-$30,000) (Economic loss of $30,000).
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