Asked by Alexis Lowrance on May 18, 2024
Verified
Pure or economic profit is:
A) the amount by which accounting profits exceed normal profits.
B) determined by subtracting explicit costs from total revenue.
C) the return required to retain entrepreneurial talent in some particular line of production.
D) the return to any resource the supply of which is perfectly inelastic.
Economic Profit
The difference between total revenue and total costs, including both explicit and implicit costs, providing a measure of performance beyond accounting profit.
Accounting Profits
The net income for a company calculated by subtracting total expenses from total revenues, according to standard accounting practices.
Explicit Costs
Direct, out-of-pocket payments for inputs or resources used in the production of goods or services.
- Comprehend the principles of economic profits versus normal profits and how they diverge.
Verified Answer
BA
bryan avilaMay 20, 2024
Final Answer :
A
Explanation :
Pure or economic profit is the amount by which accounting profits exceed normal profits. Normal profits are considered the minimum return necessary to keep an entrepreneur in a particular line of business, and they are included in the firm's accounting costs. Economic profit, therefore, is any profit over and above normal profit.
Learning Objectives
- Comprehend the principles of economic profits versus normal profits and how they diverge.