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(Solved): 1. Use an appropriate example from your experience to distinguish between accounting profit, ec ...
1. Use an appropriate example from your experience to distinguish between accounting profit, economic profit, and normal profit. Based on your analisis does accounting profit or economic profit determine how entrepreneurs allocate resources between different business ventures? please explain based on your example
Expert Answer
I can provide a theoretical example to distinguish between accounting profit, economic profit, and normal profit.Let's consider a hypothetical scenario where an entrepreneur runs a small business that produces and sells handmade soap. In the first year, the entrepreneur invests $10,000 in the business and earns a total revenue of $12,000. The total costs incurred in the first year are $8,000, which includes direct costs such as raw materials, labor, and indirect costs such as rent and utilities.