Answer:
c) $300; negative $100
Explanation:
Accounting profit is the difference between the total revenue and the total explicit cost. Explicit cost are those transaction cost incurred to generate revenue . E.g the cost of the ingredients, bottles and label.
Accounting profit for Linda:
= (100× $10) - 700
= $300
Economic profit on the other hand is the difference between revenue and economic cost. Economic cost includes both accounting cost and opportunity cost.
Opportunity cost is the value of the next best alternative sacrificed in favor of a decision.
The opportunity cost for Linda is the lost earnings from her job which is $400 ii.e ( 20 × $20).
Economic profit = (100 × $10) - (700 +400)
= $ 1,000 - 1,100
= -$100
Accounting profit: $300
Economic profit: -$100
Answer:
The correct option is C,$300; negative $100
Explanation:
Accounting profit refers to total revenue less all explicit costs incurred in generating the revenue.Explicit costs are the actual costs incurred that necessitated outflow of funds from the business.
Accounting profit =($10*100)-$700
Accounting profit =$1000-$700
Accounting profit =$300
Economic profit is total revenue less both explicit costs and implicit costs,where implicit costs refer to benefits lost as a result of choosing to prepare the ketchup instead of engaging in another productive task.
Economic profit=$1000-$700-($20*20)
Economic profit=$1000-$700-$400
Economic profit=-$100
