What happens to accounting profit compared to economic profit when there are implicit production costs?

Multiple choice question for Average And Total Cost. Select an option, then review the explanation below.

Show Answers

Accounting profit is greater than economic profitEconomic profit remains zero at all timesEconomic profit surpasses accounting profitAccounting profit is always zeroEconomic profit and accounting profit are identical

Explanation

When implicit costs are included, accounting profit does not account for them, so it will be higher than economic profit, which deducts both explicit and implicit costs.

Practice related questions from the same subject.

1.When a production function shows initially rising marginal product followed by diminishing marginal product as output grows, how will the marginal cost curve behave?
2.What happens to the average total cost when marginal cost is less than the average total cost?
3.Which of the following statements accurately describes cost behavior over time?
4.How does the slope of a production function change when it demonstrates diminishing marginal returns?
5.Naila runs a small pottery business producing 1,000 items annually, each sold at Rs 100. The raw materials cost her Rs 20,000 for these 1,000 pieces. She has invested Rs 100,000 in the factory and equipment, half from her own savings and half borrowed at an interest rate of 10%. (Assume she could have alternatively invested her own money elsewhere at 10% interest.) Additionally, Naila has the option to work at another pottery factory earning Rs 40,000 per year. What is the economic profit from Naila's pottery business?

What happens to accounting profit compared to economic profit when there are implicit production costs?

Explanation

More Average And Total Cost MCQs