Asked by Sally Suzie on May 03, 2024
Verified
If economic profits in an industry are zero and implicit costs are greater than zero, then
A) resources will move out of the industry.
B) there will be no production in the short run.
C) accounting profits are greater than zero.
D) new firms will enter the industry.
Accounting Profits
Accounting profits represent the financial gains of a business as calculated by subtracting total explicit costs from total revenues, according to standard accounting practices.
Industry Entry
The act or process of starting a new business or expanding into a new segment within a particular market or industry.
- Distinguish among economic profits, accounting profits, and normal profits, and compute them by employing explicit and implicit costs.
- Comprehend the circumstances that lead to firms entering or exiting a market in response to economic gains.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
C
Explanation :
When economic profits are zero, it means that all costs, including both explicit (accounting costs) and implicit (opportunity costs), are being covered. If implicit costs are greater than zero, it implies that there are opportunity costs being incurred. Since economic profit accounts for both explicit and implicit costs, and accounting profit only accounts for explicit costs, having a zero economic profit and positive implicit costs means that the accounting profits (which do not deduct implicit costs) must be greater than zero.
Learning Objectives
- Distinguish among economic profits, accounting profits, and normal profits, and compute them by employing explicit and implicit costs.
- Comprehend the circumstances that lead to firms entering or exiting a market in response to economic gains.