Which of the following statements is false? Group of answer choices If economic profit is positive, accounting profit must also be positive. If economic profit is negative, accounting profit must also be negative. None of the above statements is false. Explicit costs of using market-supplied resources entail an opportunity cost equal to the dollar cost of obtaining the resources in the market. When economic profit is zero, the firm's owners could not have done better putting their resources in some other industry of comparable risk.

Question

26-05-2020
Business

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Which of the following statements is false? Group of answer choices If economic profit is positive, accounting profit must also be positive. If economic profit is negative, accounting profit must also be negative. None of the above statements is false. Explicit costs of using market-supplied resources entail an opportunity cost equal to the dollar cost of obtaining the resources in the market. When economic profit is zero, the firm's owners could not have done better putting their resources in some other industry of comparable risk.

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enyo enyo · Answer 1 · 2020-05-28T09:38:26+02:00

Answer:

If economic profit is positive, accounting profit must also be positive

Explanation:

Accounting Profit is the excess of firm revenues over its explicit, monetarily paid costs.

Accounting Profit = Total Revenue - Total Explicit costs (eg rent paid, employees salary paid)

Economic Profit is the excess of firm revenues over its explicit & implicit, monetarily unpaid, opportunity costs.

Economic Profit = Total Revenue - Total explicit costs - Total implicit costs (interest on self owned capital, salary of job sacrifised)

So : As Economic Profit subtracts more costs from revenue than Accounting Profit, former is lesser than latter. Hence : if economic profit is positive, accounting profit must also be positive.