A firm produces 2,00,000 units a year and sells all for Rs. 10 each. The explicit costs of production are Rs. 15,000 and the implicit costs of production are Rs. 3,00,000. The firm has an accounting profit of

The correct answer is A. Rs. 5,00,000 and an economic profit of Rs. 2,00,000.

Accounting profit is the difference between total revenue and explicit costs. In this case, the accounting profit is 2,00,000 units * Rs. 10/unit – Rs. 15,000 = Rs. 5,00,000.

Economic profit is the difference between total revenue and total costs, which includes both explicit and implicit costs. In this case, the economic profit is 2,00,000 units * Rs. 10/unit – Rs. 15,000 – Rs. 3,00,000 = Rs. 2,00,000.

Therefore, the firm has an accounting profit of Rs. 5,00,000 and an economic profit of Rs. 2,00,000.

Here is a brief explanation of each option:

• Option A: Rs. 5,00,000 and an economic profit of Rs. 2,00,000. This is the correct answer.
• Option B: Rs. 4,00,000 and an economic profit of Rs. 2,00,000. This option is incorrect because the economic profit is Rs. 2,00,000, not Rs. 4,00,000.
• Option C: Rs. 3,00,000 and an economic profit of Rs. 4,00,000. This option is incorrect because the economic profit is Rs. 2,00,000, not Rs. 4,000.
• Option D: Rs. 2,00,000 and an economic profit of Rs. 5,00,000. This option is incorrect because the accounting profit is Rs. 5,00,000, not Rs. 2,000.