What is the difference between economic profit and accounting profit?
What will be an ideal response?
Economic profits equal total revenue minus explicit and implicit costs. Accounting profit equals total revenue minus explicit costs only. The difference between economic profit and accounting profit is therefore implicit costs.
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Which of the following is a reason for economies of scale?
A) Fixed costs are spread out as volume increases. B) The law of diminishing returns does not take effect. C) Input productivity increases as a result of greater specialization. D) There is greater savings in transportation costs.
Money as a medium of exchange I. Facilitates the exchange of goods II. Reduces the incentive to barter
A. I only B. II only C. Both I and II D. Neither I nor II
A firm is likely to be a natural monopoly:
A. when the demand for its product or service is inelastic. B. if it is producing an inferior good. C. if economies of scale are experienced over the full range of output. D. because government grants it an exclusive franchise.
For a firm to be able to engage in price discrimination, it must
A) face a downward sloping demand curve. B) produce more than one product. C) have customers of different levels of wealth and age. D) have economies of scale.