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Chapter 7: Q 2. (page 183)

Continuing from Exercise 7.1, the firm鈥檚 factory sits on land owned by the firm that it could rent for$30,000per year. What was the firm鈥檚 economic profit last year?

Short Answer

Expert verified

The firm's economic profit was$20,000last year.

Step by step solution

01

Step 1. Given information

Salesrevenue:$1MillionLabor:$600,000Capital:$150,000Materials:$200,000Rent:$30,000

02

Step 2. calculation

Economic profit = Accounting profit-implicit cost

=$50,000-$30,000=$20,000.

So, The Economic profit of the firm last year is$20,000

03

Final answer

The Economic profit of the firm last year is$20000

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