TutorOn by Sanath Withanage

Question:

Economic profit can be calculated as accounting profit minus which of the following?
(1) Fixed costs
(2) Implicit costs
(3) Depreciation
(4) Direct costs
(5) Total costs

Correct Answer:

(2)

Answer Explanation:

Accounting profit only considers explicit (out-of-pocket) costs. Economic profit deducts both explicit costs and implicit costs (the opportunity costs of using resources owned by the firm, like the owner’s time or capital).

Topic: Costs of Production Year: 2022