Using the table below explain why the economic profit and the accounting profit of this firm may be different.

Question

Quizplus · Accepted Answer

The Answer is Economic profit is calculated by taking total revenue and subtracting all economic costs including implicit costs or opportunity costs. In the above example this firm incurs total economic costs of $31,000 and therefore the firm would experience negative economic profit. Alternatively the accounting profit would be positive since only the explicit costs of $29,000 would be counted and the firm would enjoy an accounting profit of $1,000.

Using the Table Below Explain Why the Economic Profit and the Accounting