Question

In: Economics

choose right option ot fillin the blanks1. Economic profit _______ (will never exceed/always exceeds)accounting...

choose right option ot fillin the blanks

1. Economic profit _______ (will never exceed/always exceeds) accounting profits

2. Economic profit takes _____ (only implicit/explicit and implicit/only explicit) costs into account whereas account profit takes _______(only implicit/explicit and implicit/only explicit) costs in account

3. Explicit costs _______(do not require/require) a direct outlay of money whereas implicit costs. _______ (require/do not require) a direct outlay of money

Solutions

Expert Solution

1)economic profit will never exceed accounting profits

2) Economic profit takes explicit and implicit costs into accounts where as account profit takes only explicit cost in account.

3)expilicit cost require a direct outlay of money whereas implicit cost do not require a direct outlay of money

explanation;

1,2)Economic profit involve explicit and implicit cost.But in accounting profit,it includes explicit cost only. therefore economic profit can be equal to accounting profit or less than that but not more than that.

Economic profit =total revenue - explicit cost - Implicit cost

Accounting profit =total revenue - explicit cost

3) Explicit costs are input costs that require a direct outlay of money by the firm.whereas Implicit costs are input costs that do not require an outlay of money by the firm


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