Question

economic profit is equal to total revenue minus the group of answer choices opportunity cost of producing goods and services. explicit cost of producing goods and services. accounting cost of producing goods and services. implicit cost of producing goods and services.

Answer 1

Economic profit is determined by subtracting both explicit and implicit costs from total revenue, representing the true financial performance of a business beyond just cash flows and expenses.

Step-by-step explanation:

Economic profit is calculated by taking total revenue and subtracting both explicit costs and implicit costs. While accounting profit only considers explicit costs, economic profit accounts for both types of costs, which allows a business to assess its true financial performance. In a given example where the total revenues are $200,000, explicit costs are $85,000, and implicit costs are $125,000, the economic profit would be a negative $10,000 per year, showcasing a loss rather than a profit.