Accounting profit differs from economic profit because:
A) accounting cost does not include sunk cost.
B) economic cost includes all relevant opportunity costs.
C) accounting cost includes the implicit costs of production.
D) accounting cost does not include fixed cost.
E) economic cost does not include the explicit costs of production.

Question

Quizplus · Accepted Answer

Accounting profit only takes into account explicit costs, such as wages and materials, while economic profit considers both explicit and implicit costs, including the opportunity costs of alternative uses of resources. Therefore, choice B is the correct answer as economic cost includes all relevant opportunity costs.

Accounting Profit Differs from Economic Profit Because