Question

Economic profit is the best measure of a firm's performance because...

- economic profit fully accounts for all sources of revenue.
implicit costs are generally too difficult to measure accurately.
- the opportunity cost of using all resources is subtracted from total revenue.
- only explicit costs influence managerial decisions since, in general, - only explicit costs can be subtracted from revenue for the purposes of computing taxable profit.

Answer 1

Economic profit is the best measure of a firm's performance because it takes into account both explicit and implicit costs.

Step-by-step explanation:

Economic profit is the best measure of a firm's performance because it takes into account both explicit and implicit costs. While accounting profit only considers explicit costs, economic profit includes the opportunity cost of using all resources. By subtracting both explicit and implicit costs from total revenue, economic profit provides a more comprehensive assessment of a firm's profitability.