Understanding Profit in Economics

What is the main difference between accounting profit and economic profit?

• Economic profit includes both explicit and implicit costs, while accounting profit only includes explicit costs.

• Accounting profit includes implicit costs, while economic profit does not.

• Economic profit is calculated by subtracting only the explicit costs from total revenue.

• Accounting profit is always higher than economic profit.

In the example of LeBron James opening a taco shop, what is the implicit cost considered by economists?

• The cost of ingredients for the tacos.

• The rent for the taco shop.

• The wages paid to the workers.

• The salary LeBron could earn if he stayed in the NBA.

How do economists view zero economic profit?

• As a normal outcome in a competitive market.

• As a sign of business failure.

• As an indication of high accounting profit.

• As a reason to close the business.

What is the term used to describe zero economic profit?

• Negative profit

• Abnormal profit

• Supernormal profit

• Normal profit

Why might other firms enter a market where businesses are making a lot of profit?

• To create a monopoly.

• To increase the overall market costs.

• To share in the high profits.

• To reduce competition.