Asked by Darshpreet Singh on Jul 21, 2024
Verified
Economic profits are
A) always larger than accounting profits.
B) the sum of accounting profits and implicit costs.
C) equal to the difference between total revenues and implicit costs.
D) equal to the difference between accounting profits and implicit costs.
Accounting Profits
The difference between total revenue and explicit costs, representing the net income shown on a company's financial statements.
Implicit Costs
The opportunity costs associated with a company's use of resources that it owns, representing the potential income lost by not using those resources in an alternative way.
Total Revenues
The overall sum of money earned by a business from its sales of goods or services, calculated without deducting any expenses.
- Identify the differences among economic, accounting, and normal profits, and ascertain their amounts by applying explicit and implicit costs.
Verified Answer
SK
Sunny KaushalJul 23, 2024
Final Answer :
D
Explanation :
Economic profits are calculated by subtracting both explicit (accounting costs) and implicit costs from total revenues. Since accounting profits only subtract explicit costs, economic profits are equal to accounting profits minus implicit costs.
Learning Objectives
- Identify the differences among economic, accounting, and normal profits, and ascertain their amounts by applying explicit and implicit costs.