Any positive economic profit or positive net present value must arise from
A) market imperfections or inefficiencies such as a monopoly situation.
B) cost-saving projects that allow the firm to increase costs above the current level such as economies of scale and access to distribution channels.
C) accelerated depreciation assisting in cash flow.
D) less actual risk than perceived risk

Question

Quizplus · Accepted Answer

Positive economic profit or positive net present value can only occur in the presence of market imperfections or inefficiencies such as a monopoly situation. In perfect competition, profits are driven to zero, meaning firms earn only a normal rate of return. Thus, any positive economic profit or positive net present value represents an opportunity to make excess profits due to market imperfections or inefficiencies.

Any Positive Economic Profit or Positive Net Present Value Must