Asked by
Lucas Nolan
on Nov 25, 2024Verified
Which of the following definitions is correct?
A) Accounting profit + economic profit = normal profit.
B) Economic profit − accounting profit = explicit costs.
C) Economic profit = accounting profit − implicit costs.
D) Economic profit − implicit costs = accounting profits.
Accounting Profit
The difference between total revenue and explicit costs of a business.
Economic Profit
The profit a company makes after deducting both explicit and implicit costs, reflecting the total opportunity costs of its resources.
Implicit Costs
The opportunity costs of using resources that are owned by the firm or entrepreneur for one purpose instead of another, not directly paid out in cash.
- Distinguish between accounting and economic profits.
Verified Answer
AD
Learning Objectives
- Distinguish between accounting and economic profits.