The correct definition of economic profit is
A) total revenue minus explicit and implicit costs.
B) total revenue minus implicit costs.
C) total revenue minus fixed and variable costs.
D) accounting profit plus implicit costs.
E) total revenue minus accounting profit.

Question

Quizplus · Accepted Answer

Economic profit takes into consideration both explicit costs (out-of-pocket expenses) and implicit costs (opportunity costs). Therefore, option A is the correct choice as it reflects the total revenue earned by subtracting all costs. Options B, C, D, and E only account for either implicit or explicit costs but not both, making them incorrect.

The Correct Definition of Economic Profit Is