Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were Multiple Choice $100,000 and its economic profits were $0. $200,000 and its economic profits were $0. $100,000 and its economic profits were $100,000. $0 and its economic loss was $200,000.

The correct answer is "$200,000 and its economic profits were $0"

Explanation:

Implicit costs, also known as economic costs, are costs a firm renounces to when it uses a factor of production. Implicit costs, as opposed to explicit costs, are not accounted. Therefore the firm's accounting profits are obtained by subtracting the explicit costs from its revenue, while the economic profits are obtained by substracting the total costs from its revenue.

First we calculate the firms revenue:

Revenue = 4000 units * $300 per unit = $1,200,000

Then we proceed to calculate the "total costs" which is the sum of the implicit plus the explicit costs:

Total costs = $200,000 + $1 million = $1,200,000

Now we have everything we need to calculate the accounting profits and the economic profits:

Accounting profits = Revenue - Explicit costs = $1,200,000 - $1 million = $200,000

Economic profits = Revenue - Total costs = $1,200,000 - $1,200,000 = $0

Therefore the correct answer is the second option.