Suppose your accountant told you that the $50,000 you made last year was your normal profit. When you asked him what your accounting profit was he replied that it was precisely the same as your normal profit. You wouldn't have to ask what your economic profit was because you know it must be
A) 0
B) $50,000
C) $100,000
D) $50,000 loss
E) $100,000 loss

Question

Quizplus · Accepted Answer

Economic profit is calculated by subtracting both explicit (accounting costs) and implicit (opportunity costs) from total revenue. If your accounting profit, which only subtracts explicit costs, is the same as your normal profit (which includes opportunity costs), it means there are no additional opportunity costs unaccounted for. Therefore, your economic profit, which accounts for both types of costs, would be zero, indicating you are earning exactly what you would in your next best alternative.

Suppose Your Accountant Told You That the $50,000 You Made