L and B Agree to Share Profits and Losses in the Ratios

question 47

Multiple Choice

L and B agree to share profits and losses in the ratios 8:2. If the net loss is $25 000, how much loss is allocated to each partner?

• A) L $20 000; B $5000
• B) L $5000; B $20 000
• C) L $16 000; B $9000
• D) L $23 000; B $2000

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Definitions:

Economic Profit

The profit a company makes after deducting both its explicit (direct) and implicit (opportunity) costs; it's a more comprehensive measure than accounting profit.

Allocative Efficiency

The optimal distribution of resources in a market where goods and services are dispensed according to consumer preferences.

Monopolistic Competition

A market structure where many companies sell products that are similar but not identical, allowing for significant competition but with some control over prices.