In: Economics
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
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