Home › AP Microeconomics › Economics › Production, Costs and Industry Structure › Total revenue minus total cost, counting both ex…
Total revenue minus total cost, counting both explicit and implicit costs, is:
AGross revenue
BMarginal revenue
CEconomic profit
DAccounting profit
Answer & Solution
Correct answer: C. Economic profit
1. The two profit measures differ in which costs they subtract.
2. Economic profit is total revenue minus total cost, including both explicit and implicit costs.
3. Accounting profit subtracts only the explicit costs.
4. Economic profit is therefore always the smaller of the two.
_Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 7 'Production, Costs and Industry Structure', sections 7.1-7.4_
Related questions
Diminishing marginal returns is described as the general concept behind:The reason capital is treated as the fixed input in the short run is that it:Economies of scale become relevant only after a firm has settled its:Implicit costs are described as more subtle than explicit costs but:A firm reporting positive accounting profit could still be making:Accounting profit differs from economic profit because accounting profit leaves out:Breaking total costs into fixed and variable parts provides the basis for calculating:Once a firm has chosen its least costly production technology, it next considers the: