Accounting profit is called normal profit when:
A)accounting profit is equal to zero.
B)economic profit is equal to zero.
C)opportunity cost is equal to zero.
D)average cost is minimum.
E)economic profit is equal to accounting profit.

Question

Quizplus · Accepted Answer

Accounting profit is the total revenue minus total explicit costs while economic profit includes implicit costs as well. When economic profit is equal to zero, it means that the business is earning just enough to cover both explicit and implicit costs, which is the minimum required for a business to continue operating in the long run. Accounting profit in this case is not enough to compensate for the opportunity cost of running the business, hence it is called normal profit.

Accounting Profit Is Called Normal Profit When