Question

The full opportunity cost of capital invested in a business is generally not included as a cost when accounting profits are calculated.​ Thus, accounting profits often are -------------- than economic profits. We assume throughout that the goal of the firm is to maximize economic profits.

Answer 1

The correct answer is: more than.

Step-by-step explanation:

Economic profits calculation includes both implict and explicit costs. While implicit costs is not included in calculating accounting profits.

Since calculating accounting profits, the opportunity cost of capital is not included as a cost, that is why accounting profits is often higher than economic profits.

Accounting profits overstate profits.