Identify the truthfulness of the following statements.
I. A firm can earn a positive accounting profit but a negative economic profit.
II. Opportunity cost is included in the definition of economic profit but not in the definition of accounting profit.

Question

Identify the truthfulness of the following statements. 
I. A firm can earn a positive accounting profit but a negative economic profit.
II. Opportunity cost is included in the definition of economic profit but not in the definition of accounting profit.

Quizplus · Accepted Answer

Economic profit accounts for opportunity costs, while accounting profit does not. Therefore, a firm can have positive accounting profit but negative economic profit if opportunity costs are high. Both statements are true.

Identify the Truthfulness of the Following Statements