alleryStart learning →A firm reporting positive accounting profit could still be making:
AOnly larger economic profit
BNo revenue at any point
CNo explicit costs at all
DZero or negative economic profit
Answer & Solution
Correct answer: D. Zero or negative economic profit
1. Economic profit subtracts more than accounting profit does.
2. Economic profit is total revenue minus total cost, including both explicit and implicit costs.
3. Accounting profit subtracts only the explicit costs.
4. So once the forgone alternatives are counted, a positive accounting profit can shrink to zero or below.
5. That is why economists judge a business by its economic profit.
_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_
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