When accounting profits are positive, economic profits

Question

Quizplus · Accepted Answer

Accounting profits only take into account explicit costs, while economic profits consider both explicit and implicit costs. Therefore, economic profits can be negative even if accounting profits are positive, if implicit costs (such as opportunity costs or the cost of capital) are high enough to outweigh the accounting profits. Economic profits could also be zero or positive depending on the specific circumstances.

When Accounting Profits Are Positive, Economic Profits