Economic Profit and Costs Quiz

Which of the following best defines economic profit?

• Total revenue minus total cost

• Total revenue minus implicit costs

• Total revenue minus explicit and implicit costs

• Total revenue minus fixed costs

Accounting profit differs from economic profit in that it:

• Ignores fixed costs

• Includes implicit costs

• Excludes implicit costs

• Includes opportunity costs

A firm earns zero economic profit when:

• Revenue equals costs

• Explicit costs equal implicit costs

• It breaks even

• Total revenue equals explicit and implicit costs

What is opportunity cost?

• The cost of explicit inputs

• The cost of not pursuing the next best alternative

• Revenue forgone from not advertising

• Total cost of fixed inputs

Which of the following is an example of an implicit cost?

• Wages paid to employees

• Rent paid for office space

• Owner’s forgone salary working elsewhere

• Utilities paid

Total profit is calculated as:

• TR – AVC

• TR – ATC

• TR – AFC

• TR – MC

Which of the following statements is true?

• Economic profit is always greater than accounting profit

• Accounting profit accounts for opportunity cost

• Accounting profit is always less than economic profit

• Economic profit is always less than or equal to accounting profit

If a firm is covering all its opportunity costs, it is said to be:

• Making an economic loss

• Earning accounting profit only

• Earning normal profit

• Maximizing profit

If total revenue is $200,000, explicit costs are $150,000, and implicit costs are $60,000, then the economic profit is:

• $10,000

• -$10,000

• $50,000

• $200,000

Which type of profit do accountants typically calculate?

• Economic profit

• Normal profit

• Accounting profit

• Marginal profit