Final answer:
Economic measures of competitive advantage compare a firm's returns to its cost of capital, factoring in both explicit and implicit costs to determine economic profit, versus just explicit costs in accounting profit.
Step-by-step explanation:
Economic measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry. A firm is said to have an economic advantage over its competitors when it generates a higher rate of economic profit, which is the profit after considering both explicit costs such as materials and wages, and implicit costs, including opportunity costs such as forgone investments.
The concept is contrasted with accounting profit, which only factors explicit costs, and does not consider the cost of equity or alternative investments that a company could have pursued with its resources.