Question
In: Economics
In July 2020, Delta Air Lines reported earnings for the second quarter of 2020. Delta’s CEO...
In July 2020, Delta Air Lines reported earnings for the second quarter of 2020. Delta’s CEO Ed Bastian stated “[d]emand has stalled as the virus has grown...coupled with the quarantine measures”. Delta’s posted a $5.7 billion net loss in the second quarter. Which of the following is correct?
- A. Delta's accounting profit is -$5.7 billion with a lower economic profit.
- B. Delta's accounting profit is -$5.7 billion with a higher economic profit.
- C. Delta's economic profit is -$5.7 billion with a lower accounting profit.
- D. Delta's economic profit is -$5.7 billion with a higher accounting profit.
- E. None of the above.
Solutions
Expert Solution
A net loss is when expenses exceed the income or total revenue . So here the accounting profit is negative = - $5.7 billion . And economuc profit is always lower than accounting profit because it takes into consideration , implicit costs also along with explicit costs . Answer : A. Delta's accounting profit is -$5.7 billion with a lower economic profit.
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