AP Microeconomics / Unit 3: Production, Cost, and the Perfect Competition Model
3.4 Types of Profit
Notes
- Accounting profit = revenue − explicit costs.
- Economic profit = revenue − explicit − implicit costs.
- Normal profit: economic profit = 0 (covers all opportunity costs).
Practice
Revenue 100,000; explicit costs 60,000; implicit costs 30,000. Economic profit:
$100-60-30$.
Accounting profit for that firm:
Ignores implicit costs.
Zero economic profit means the firm:
Normal profit.
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