If economic profit is equal to zero, then the entrepreneur is making
A)a normal profit.
B)zero profit as recorded by accountants.
C)negative profit as recorded by accountants.
D)zero taxable income.
E)an amount equal to the implicit rental rate.

Question

Quizplus · Accepted Answer

Economic profit measures the difference between total revenue and all costs, including opportunity costs. If economic profit is equal to zero, it means that the entrepreneur is earning enough revenue to cover all costs, including normal profit. Normal profit is the minimum amount of profit necessary to keep the entrepreneur engaged in the business, and it is equal to the implicit rental rate of the entrepreneur's capital. Therefore, if economic profit is zero, the entrepreneur is making a normal profit, which is necessary to incentivize them to continue their business operations.

If Economic Profit Is Equal to Zero, Then the Entrepreneur