Accounting profit is calculated as the difference between total revenue and explicit costs, such as wages, rent, and supplies. It does not take into account implicit costs, such as opportunity cost of using resources elsewhere, which are factored in economic profit. Therefore, accounting profit is less than economic profit.

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Accounting Profit Is

Question 8

Multiple Choice

Accounting profit is

A) the only measure of profitability.
B) equal to total revenue minus implicit costs.
C) the difference between total revenue and explicit costs.
D) equal to total revenue minus explicit and implicit costs.
E) less than economic profit.

Correct Answer: