Final answer:
The correct answer is a) Net profit, which is computed by subtracting a firm's explicit costs from its total revenue, where total revenue is the product of the price and quantity sold. Therefore, the correct answer to the student's question is a) Net profit.
Step-by-step explanation:
The amount of revenue a firm receives for the sale of its products minus its costs of production, as measured by its accountants, is the firm's accounting profit.
To calculate this, you take the total revenue, which is the income generated from the sale of products, quantified by the price of the product times the quantity sold (Total Revenue = Price x Quantity), and subtract the explicit costs, which would include all the direct costs paid out by the company to produce and sell those goods.
Therefore, the correct answer to the student's question is a) Net profit. Net profit considers total revenue minus the explicit costs only and does not include implicit costs or other expenses beyond the direct costs of production. Whereas, economic profit includes both explicit and implicit costs. Therefore, the correct answer to the student's question is a) Net profit.