Asked by Karan Kahlon on Jun 02, 2024
Verified
If the accounting profit for a firm is negative,the:
A) economic profit must be positive.
B) economic profit must be negative.
C) firm should produce more.
D) firm will not owe any taxes.
Accounting Profit
The difference between the total revenue and explicit costs of a firm, not accounting for implicit costs.
Economic Profit
The variance between a company's overall incomes and its combined explicit and implicit expenses.
- Familiarize yourself with the procedures for calculating economic and accounting profits and distinguishing one from the other.
Verified Answer
PW
PIYUMI WIJEWARDHANAJun 09, 2024
Final Answer :
B
Explanation :
Economic profit takes into account both explicit and implicit costs, while accounting profit only considers explicit costs. Therefore, if accounting profit is negative, it is likely that implicit costs are higher than expected and therefore, economic profit will also be negative.
Learning Objectives
- Familiarize yourself with the procedures for calculating economic and accounting profits and distinguishing one from the other.
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