Homework Answers
The firm's explicit costs = operating costs + depreciation = $3 million + $1.5 million = $4.5 million
Its implicit cost = the rent forgone = $2 million
Economic profit = total revenue - (explicit cost + implicit cost) = $6 million - ($4.5 million + $2 million) = $6 million - $6.5 million = -$0.5 million.
So, the firm would suffer an economic loss of $0.5 million.
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