When economic profits are zero for a firm, it means that:

Question

Quizplus · Accepted Answer

When economic profits are zero, it means the firm is covering all its costs, including opportunity costs, making the industry unattractive for new entrants and unnecessary for existing firms to exit. This does not necessarily mean accounting profits are zero, as economic profits consider both explicit and implicit costs, while accounting profits do not account for opportunity costs.

When Economic Profits Are Zero for a Firm, It Means