When total revenue is less than the sum of explicit and implicit costs,
A) accounting profit is negative.
B) normal profit is zero.
C) the firm is experiencing an economic loss.
D) economic profit is negative but normal profit is positive.
E) accounting profit is positive.

Question

Quizplus · Accepted Answer

If the total revenue is less than the sum of explicit and implicit costs, it means that the firm is not even covering its opportunity costs (implicit costs) in addition to its explicit costs. In this case, the firm is experiencing an economic loss. This is different from accounting profit, which only takes explicit costs into consideration. Therefore, option C is the best answer.

When Total Revenue Is Less Than the Sum of Explicit