Question

Q) Is Accounting profit smaller than Economic profit? If yes, why? If not, why not ? Define Accounting profit and economic profit.

Wish the answered in 5sentences by your own (I would be really appreciated)

Answer 1

No, accounting profit is larger than economic profit because economic profit also takes opportunity cost into account. Opportunity cost increases total cost which leads to decrease in economic profit.

Accounting profit is the difference between total revenue and total explicit cost.

Economic profit is the difference between total revenue and total cost where total cost is the sum of explicit and implicit cost.