Ask Question
18 March, 09:39

The Lynx Manufacturing Company produces components used in electronic toys. In fiscal year 2017, Lynx earned an accounting profit of $3 million. However, Lynx's production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true? a) lynx earned an economic profit of $5.5 million. b) lynx earned an economic profit of $500,000. c) lynx suffered an economic loss of $500,000. d) lynx suffered an economic loss of $2.5 million.

+5
Answers (2)
  1. 18 March, 09:58
    0
    B) lynx earned an economic profit of $500,000

    Explanation:

    Economic profit is the difference between revenue received and the cost of inputs used and any opportunity cost.

    Economic profit = total income - total expense - opportunity cost

    Given that

    Total income = 3 million

    Total expenses = 500000

    Opportunity cost = 2million

    Economic profit = 3000000 - 500000 - 2000000

    Economic profit = 500,000

    Therefore, lynx earned economic profit of $500,000
  2. 18 March, 13:23
    0
    B) lynx earned an economic profit of $500,000.

    Explanation:

    economic profit/loss = accounting profit - opportunity costs

    economic profit = $3,000,000 - ($2,000,000 + $500,000) = $3,000,000 - $2,500,000 = $500,000

    Opportunity costs are defined as the extra costs (or lost benefits) resulting from choosing one activity (or investment) over another alternative.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The Lynx Manufacturing Company produces components used in electronic toys. In fiscal year 2017, Lynx earned an accounting profit of $3 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers