Chapter 10R, Problem 2MCQ

To determine

The comparison between accounting profit and economic profit.

Answer to Problem 2MCQ

(a) Only be greater than economic profit.

Explanation of Solution

The accounting profit is the amount left to the firm after paying all the explicit costs and depreciation of the assets. Economic profit is what is left to firms after deducing explicit and implicit costs. Usually, accounting profit is higher than economic profit since it does not include implicit costs. Hence, option (a) is correct.

Options (b), (c), (d), and (e) are incorrect because accounting profit does not include implicit cost and economic profit includes implicit cost, which reduces the value of economic profit against accounting profit.

Economics Concept Introduction

Introduction:

Accounting profit is the profit left to the firm after deducing the explicit costs and cost of depreciation. On the other hand, the economic profit is the amount left with the firm after deducing its opportunity costs from total revenue.