Final answer:
At a firm's economic profit break-even point, accounting profits are zero because the firm is earning enough to cover all costs, including the opportunity costs of capital.
Step-by-step explanation:
Accounting profits at a firm's economic profit break-even point are zero. Economic profit is calculated by subtracting both explicit and implicit costs from total revenue. At the break-even point, a firm's accounting profit covers all explicit costs and the implicit costs, which represent the opportunity cost of capital. This means the firm is earning exactly what its resources could gain in the next best alternative use. Therefore, while accounting profits remain positive due to covering the opportunity costs, economic profits are zero as the firm is not earning above the opportunity costs.
At a firm's economic profit break-even point, accounting profits are zero. Economic profit, derived by deducting both explicit and implicit costs from total revenue, reflects the firm's true financial performance. The break-even point occurs when accounting profit covers explicit costs and implicit costs—representing the opportunity cost of capital. In this scenario, the firm is earning precisely what its resources could gain in the next best alternative use. Although accounting profits are positive, accounting for explicit and implicit costs, economic profits are zero because the firm isn't earning above the opportunity costs. This distinction emphasizes the economic concept of accounting for both explicit and implicit costs to provide a more accurate assessment of a firm's financial position and performance in relation to alternative opportunities.