The economic profit on an investment is zero when:
A) the total revenue from the investment exceeds the costs of the investment.
B) the revenue from the investment just covers the fixed cost of the investment.
C) the accounting profit and economic profit are equal.
D) the investment earns a normal rate of return.
E) the sunk cost of the investment is zero.

Question

Quizplus · Accepted Answer

Economic profit is equal to the total revenue minus the opportunity cost of the resources used in the investment. A normal rate of return is the minimum return necessary to cover opportunity cost, so if an investment earns a normal rate of return, the economic profit is zero.

The Economic Profit on an Investment Is Zero When