Asked by Jessica Leigh on May 30, 2024
Verified
It is not possible to earn an economic profit without also earning an accounting profit.
Economic Profit
The profit from business activities minus both the explicit and implicit costs, including opportunity costs.
Accounting Profit
The net income of a business as calculated by subtracting total expenses from total revenues, following standard accounting principles.
- Distinguish between explicit and implicit expenditures and their role in comprehending economic and accounting gains.
Verified Answer
AM
Ahmed Mirza 082Jun 05, 2024
Final Answer :
True
Explanation :
Economic profit takes into account both explicit (accounting) costs and implicit (opportunity) costs, whereas accounting profit only considers explicit costs. Therefore, if a firm is earning an economic profit, it must also be covering all its explicit costs, thus earning an accounting profit.
Learning Objectives
- Distinguish between explicit and implicit expenditures and their role in comprehending economic and accounting gains.