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When a firm's revenues rise more quickly than its costs?
Hopefully, the firm makes a profit.
Why would an accountant say a firm is making a profit and an economist say it is losing money?
Economists always include both implicit and explicit costs in the calculation of their profits while accountants only cater for explicit costs when calculating profits.So due to the inclusion of opportunity costs, which can be termed implicit costs, economists' profits will always be lower than accountants' profits.Hence an accountant may say they are making profits while it is different from an economist's view.
Give a brief description of implicit and explicit cost?
Explicit costs are payments the firm makes for inputs such as wages and salaries to its employees, whereas implicit costs are non-expenditure costs that occur through the use of self owned resources such as foregone income.
Will economic profit exceed accounting profit?
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, economists will factor in opportunity cost as well. For example, if a person takes their life's savings and invests it in a new company, the interest that the money could be making will be an opportunity cost for the firm, as well as the salary they could be earning at a different firm. This all means that economists will calculate higher costs, which means that economic profit is lower than accounting profit.
When a firm is earning positive economic profit?
When a firm is earning positive economic profit, it means that its total revenue exceeds its total costs, including both explicit and implicit costs. This indicates that the firm is not only covering its operating expenses but also generating a return that exceeds what it could have earned in the next best alternative. Positive economic profit often signals that the firm has a competitive advantage or is operating efficiently in its market. Additionally, it can attract new entrants to the market, potentially leading to increased competition over time.
What are implicit and explicit?
Explicit costs are payments the firm makes for inputs such as wages and salaries to its employees, whereas implicit costs are non-expenditure costs that occur through the use of self owned resources such as foregone income.
Cash expenditures a firm makes to pay for resources are called?
Explicit costs
The costs of a firm that are paid directly in money are called?
Explicit costs!
Is payment for leasing a building for the firm an implicit cost for a firm?
Payment for leasing a building is generally considered an explicit cost, as it involves a direct monetary transaction that is clearly accounted for in the firm's financial statements. However, if the firm owns the building and could have earned rental income by leasing it out to another party, the opportunity cost of not renting it is an implicit cost. Thus, while leasing payments are explicit costs, the potential income from alternative uses of owned property represents an implicit cost.
When a firm's revenues rise more quickly than its costs?
Hopefully, the firm makes a profit.
Economic function of profits and losses?
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, .
Why would an accountant say a firm is making a profit and an economist say it is losing money?
Economists always include both implicit and explicit costs in the calculation of their profits while accountants only cater for explicit costs when calculating profits.So due to the inclusion of opportunity costs, which can be termed implicit costs, economists' profits will always be lower than accountants' profits.Hence an accountant may say they are making profits while it is different from an economist's view.
What do capacity costs allow a firm to do?
Capacity costs (committed costs) give a firm the capability to produce or to sell,
Give a brief description of implicit and explicit cost?
Explicit costs are payments the firm makes for inputs such as wages and salaries to its employees, whereas implicit costs are non-expenditure costs that occur through the use of self owned resources such as foregone income.
Will economic profit exceed accounting profit?
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, economists will factor in opportunity cost as well. For example, if a person takes their life's savings and invests it in a new company, the interest that the money could be making will be an opportunity cost for the firm, as well as the salary they could be earning at a different firm. This all means that economists will calculate higher costs, which means that economic profit is lower than accounting profit.
When a firm is earning positive economic profit?
When a firm is earning positive economic profit, it means that its total revenue exceeds its total costs, including both explicit and implicit costs. This indicates that the firm is not only covering its operating expenses but also generating a return that exceeds what it could have earned in the next best alternative. Positive economic profit often signals that the firm has a competitive advantage or is operating efficiently in its market. Additionally, it can attract new entrants to the market, potentially leading to increased competition over time.
Are those costs which firm has no control?
Costs which are affected by inflation
