Asked by Marissa Martinez on Apr 25, 2024
Verified
Which of the following statements is correct?
A) Assuming that explicit costs are positive, economic profit is greater than accounting profit.
B) Assuming that implicit costs are positive, accounting profit is greater than economic profit.
C) Assuming that explicit costs are positive, accounting profit is equal to economic profit.
D) Assuming that implicit costs are positive, economic profit is positive.
Economic Profit
The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, representing the additional value created by the firm.
Accounting Profit
Accounting profit is the financial gain calculated by subtracting total explicit costs from total revenue.
Explicit Costs
Direct, out-of-pocket payments for wages, rent, materials, and other inputs necessary for the production of goods or services.
- Identify the differences between explicit and implicit costs and understand their importance for economic and accounting profitability.
Verified Answer
Learning Objectives
- Identify the differences between explicit and implicit costs and understand their importance for economic and accounting profitability.
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