Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Total revenue minus explicit costs
B
Total revenue minus total costs including opportunity costs
C
Total revenue plus implicit costs
D
Total revenue minus fixed costs
Understanding the Answer
Let's break down why this is correct
Answer
Economic profit is the money a business makes after considering all its costs, including both direct expenses and opportunity costs. Direct expenses are things like rent, salaries, and materials, while opportunity costs are the benefits a business owner gives up by choosing one option over another. For example, if you run a bakery and make $100,000 in sales, but your costs are $70,000, your accounting profit is $30,000. However, if you could have earned $20,000 working a different job instead of running the bakery, your economic profit would be only $10,000. This shows that economic profit gives a fuller picture of how well a business is doing by including all costs involved in making decisions.
Detailed Explanation
Economic profit is what you earn after paying all costs, including what you could have earned elsewhere. Other options are incorrect because This answer only looks at cash costs, not the full picture; This option adds costs instead of subtracting them.
Key Concepts
economic profit
Topic
Economic Profit Evaluation
Difficulty
easy level question
Cognitive Level
understand
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