Question

What is the primary difference between accounting profits and economic profits?

O Economic profits focus on money; accounting profits focus on all types of capital.
O Accounting profits ignore implicit costs; economic profits consider them.
O Accounting profits only occur when money is made; economic profits can occur when money is lost.
O Economic profits require the exchange of money; accounting profits do not.

Answer 1

Answer: Accounting profits ignore implicit costs; economic profits consider them.

Explanation: In simple words, implicit cost refers to the cost of choosing the best alternative and loosing the profit that one could have earned by choosing the second best alternative.

Accounting profit is the revenue that one has left with after compensating for explicit cost but economic cost also takes into consideration the implicit one.