Suppose that a sole proprietorship earning total revenues of Rs. 120,000 and is incurring explicit costs of Rs. 90,000. If the owner could work for another company for Rs.50,000 a year, we would conclude that:

The firm is incurring an economic loss

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Implicit costs are Rs.90,000

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The total economic costs an Rs. 100,000

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The individual is earning an economic profit of Rs. 25,000

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Solution

The correct option is A The firm is incurring an economic loss
Economic cost= $R s . 90, 000 + R s . 50, 000 = R s . 1, 40, 000$
Economic revenue= $R s . 1, 20, 000$
Economic loss= $R s . 140000 - R s . 120000 = R s . 20000$
Thus, we can conclude that the firm is incurring an economic loss which amounts to $R s . 20, 000$ .

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Suppose that a sole proprietorship earning total revenues of Rs. 120,000 and is incurring explicit costs of Rs. 90,000. If the owner could work for another company for Rs.50,000 a year, we would conclude that:

The correct option is A The firm is incurring an economic lossEconomic cost=Rs.90,000+Rs.50,000=Rs.1,40,000Economic revenue=Rs.1,20,000Economic loss= Rs.140000−Rs.120000=Rs.20000Thus, we can conclude that the firm is incurring an economic loss which amounts to Rs.20,000.