Purchase Solution

Sources of economic profit

Not what you're looking for?

Ask Custom Question

How do the concepts of accounting profit and economic profit differ? Why is economic profit smaller than accounting profit? What are the three basic sources of economic profit? Classify each of the following according to those sources:

a. A firm's profit from developing and patenting a new medication that greatly reduces cholesterol and thus diminishes the likelihood of heart disease and stroke.
b. A restaurant's profit that results from construction of a new highway past its door.
c. The profit received by a firm benefiting from an unanticipated change in consumer tastes.

Purchase this Solution
Solution Summary

Accounting vs. economic profit; sources of economic profit

Solution Preview

Accounting profit includes only explicit costs, such as labor and materials. Economic profit also includes implicit costs
which are the loss of the use of resources that are used in a particular endeavor. For example, the owners of a business could instead be working for a paycheck and ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Supply of Loanable Funds

    Why is the economic profit smaller than accounting profit. What are the three basic sources of economic profit?

  • Economics of energy

    How do the concepts of accounting profit and economic profit differ? Why is economic profit smaller than accounting profit? What are the three basic sources of economic profit? Classify each of the following according to those sources: a.

  • Monopolies and Oligopolies Explored

    This has helped the company to lowers its cost of operation and maximize profit. Quality consideration and industry market structure might cause a profit maximizing firm to decide to forgo using lower cost sources. 4.

  • Control Systems, Economic Value Added, ROI Techniques

    Since the major of non-profit organizations depend on discretionary funding from sources such as donations or gifts they must develop extremely intricate and effective control systems.

  • Budgeting and Accounting

    409327 Public and Non-profit Budgeting and Accounting You often see news reports predicting the direction of the economy. How accurate are these predictions and how should a financial manager of a state agency apply them?

  • Product supplied by a hospital organization

    The market structure for the Not For Profit entity is to focus on funding, as funding is the main source of revenue second to payments received through insurance and other sources.

  • GASBS 39

    Note: Please cite the sources Describe the treatment of a not-for-profit, nongovernmental foundation that is related to a public university under GASBS 39 "Determining Whether Certain Organizations Are Component Units" (2002).

  • Factors in a cost volume profit analysis

    The financing decisions must also include a component that considers the prices of materials, particularly if this is a highly volatile industry where conditions from various sources, including economic or environmental factors could have an influence

  • Theory or research about importance of innovation economically

    Sources "Innovation Economics: The Economic Doctrine for the 21st Century" http://www.innovationeconomics.org ("a non-profit, bi-partisan think tank" The expert examines theory or research about importance of innovation economically.

View More Related Solutions