If a firm incurs an economic loss, it must also incur an accounting loss.

Question

Quizplus · Accepted Answer

Economic loss includes both explicit costs (which are accounted for in accounting loss) and implicit costs (like opportunity costs), whereas accounting loss only considers explicit costs. A firm can have an economic loss if its total revenue is less than the sum of its explicit and implicit costs, even if it reports a profit or breaks even in its accounting records.

If a Firm Incurs an Economic Loss, It Must Also