ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A star athlete receives an offer of $100 million from a major shoe company for a contract to exclusively endorse its products and also receives the same offer from a competing company.If he accepts the contract offer from the first company, an economist would say that based on this information, the contract earns him
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an economic profit of $100 million because he incurred no costs.
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an economic profit of $100 million because his explicit costs are zero.
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a normal profit because his opportunity cost is equal to the payment from the contract he accepts.
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an economic loss because he is unable to accept both contracts.
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an accounting loss because he is unable to accept both contracts.
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Explanation:
Detailed explanation-1: -Accounting profit is the total revenues minus explicit costs, including depreciation. Economic profit is total revenues minus total costs-explicit plus implicit costs. Explicit costs are out-of-pocket costs for a firm-for example, payments for wages and salaries, rent, or materials.
Detailed explanation-2: -Which of the following must be true in order for a firm to earn economic profit? The firm’s price must be greater than its marginal cost.
There is 1 question to complete.