Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 8 - Production Technology and Cost - Exercises - 8.1 Economic Cost and Economic Profit - Page 203: 1.4

Answer

Because $economic$ cost typically exceeds $accounting$ cost, $accounting$ profit typically exceeds $economic$ profit.

Work Step by Step

Accounting cost = explicit cost Economic cost = explicit cost + implicit cost Hence, economic cost typically exceeds accounting cost. Accounting profit = total revenue - accounting cost Economic profit = total revenue - economic profit Hence, accounting profit typically exceeds economic profit. Because economic cost typically exceeds accounting cost, economic profit typically exceeds accounting profit.
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