Question

The difference between zero accounting profit and zero economic profit is that

a. economists do not include opportunity cost in zero accounting profit, while accountants do include opportunity cost in zero economic profit.
b. economists include opportunity cost in zero accounting profit, while accountants do not include opportunity cost in zero economic profit.
c. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit.
d. economists do not include opportunity cost in zero economic profit, while accountants do include opportunity cost in zero accounting profit.

Answer 1

In zero accounting profit takes opportunity costs into account, whereas zero economic profit does not. If a firm has zero economic profits, they are able to have positive accounting profits. A zero accounting profit means that the revenue that is made is only covering explicit costs. A zero economic profit is normal when the total revenue and expenses equal zero.