What is the difference between accounting and economic profit?

What is the difference between accounting and economic profit? Now answer the following

questions

a Jimmy owns a small guitar shop in Perth The current value of the guitar shop is $12

million If he were to sell the shop he could earn 6% annually on the proceeds

However, he will only sell at some later date if he is making an economic loss Last

year Jimmy received $10 million from selling guitars He does not pay himself a

salary, but if he worked elsewhere he could have earned $70,000 His variable

explicit costs were $09 million Ignoring taxes and depreciation, calculate Jimmy’s

accounting profit or loss Should Jimmy operate in this market?

b What happens if this year Jimmy is able to reorganise his operations such that his

explicit costs are brought down to $085 million; meanwhile, the national wage level

has gone up to $75,000 per annum

My Homework Nest
Calculate your paper price
Pages (550 words)
Approximate price: -