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If We Were Told That a Firm Earns Positive Accounting

Question 27

Multiple Choice

If we were told that a firm earns positive accounting profit and nothing else,what would we know is true about its economic profit?


A) It is positive because whenever accounting profit is positive,so is economic profit.
B) It cannot be determined without knowing the firm's implicit costs.
C) It is zero because all firms earn zero economic profit regardless of the industry.
D) It is equal to its accounting profit.
E) It is negative because its accounting profit is probably not high enough to earn positive economic profit.

Correct Answer:

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