31. The difference between zero accounting profit and zero economic profit is th

ID: 1106246 • Letter: 3

Question

31. The difference between zero accounting profit and zero economic profit is that

a. an economic profit of zero indicates a fair rate of return because it includes opportunity cost. opportunity cost and

b. an economic profit of zero indicates an unacceptable rate of return because it does not include opportunity cost.

c. an economic profit of zero indicates more than a fair rate of return because it includes opportunity cost and explicit cost..

d. an accounting profit of zero indicates a fair rate of return because it includes opportunity cost.

Answer

C. an economic profit of zero indicates more than a fair rate of return because it includes opportunity cost and explicit cost.

The economic profit =accounting profit -opportunity cost

accounting ptofit=total revenue-accounting costs

the fair rate of return is at accounting profit and economic rate of return is calculated including opportunity cost to it.

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