Practicing Success
A firm is earning a total revenue of Rs. 2 lakhs in the entire year. The out of pocket costs total up to Rs. 1,50,000. If the owner of this firm could work somewhere else, he could earn Rs.60,000. What does this imply? |
Firm is earning an economic profit Firm is incurring economic loss Implicit costs are Rs. 10, 000 Total economic costs of the firm is Rs. 2,00,000 |
Firm is incurring economic loss |
The total of explicit and implicit costs is Rs. 1,50,000 plus Rs. 60, 000 = Rs. 2,10,000 and the total revenue of the firm is 2,00,000. This implies an economic loss of Rs. 10,000. |