Asked by Linda Rydberg on May 01, 2024
Verified
If a firm is earning negative accounting profits,it implies
A) That the firm's economic profits are necessarily zero
B) That the firm's economic profits are necessarily positive
C) That the firm's economic profits are necessarily negative
D) Accounting profits alone cannot determine economic profits
Accounting Profits
The net income a company reports on its financial statements, calculated as total revenues minus explicit costs and depreciation.
Economic Profits
The difference between total revenue and total costs, including both explicit and implicit costs, indicating a gain beyond the normal profit levels expected in a competitive market.
Negative Profits
Occurs when a company's expenses exceed its revenues, resulting in financial loss.
- Differentiate between the concepts of accounting profits and economic gains.
Verified Answer
Learning Objectives
- Differentiate between the concepts of accounting profits and economic gains.
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