The Economy's Current Rate of Interest Is 10 Percent and a Firm

question 125

Multiple Choice

The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5000 and the firm's explicit costs are $3500. From this we know that this firm's

• A) accounting profit is $500.
• B) economic profit is $1,500.
• C) accounting profit is $1,500.
• D) economic profit is $5,000.

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Definitions:

Specific Asset

A particular identified asset, often marked for a specific use or project within a company's balance sheet.

Account

A record within financial bookkeeping that tracks financial transactions of a specific nature.

Revenue

The total earnings from goods or services sold, stemming from a company's main operational activities.

Financial Statements

Reports that summarize the financial performance and position of a business, including income statement, balance sheet, and cash flow statement.