A firm's economic profit is:

Question

Quizplus · Accepted Answer

Economic profit is the difference between revenue and all costs, including both explicit and implicit costs. Thus, option B correctly defines economic profit as revenue minus costs. Option A only considers the explicit costs (wage and rental price of capital) and ignores implicit costs, while option C incorrectly adds capital costs to revenue. Option D only considers labor costs and ignores other costs such as capital and opportunity costs.

A Firm's Economic Profit Is