Question

the difference between economic profit and accounting profit is that Economic profit is calvulated based on both implict and explict cost whereas accounting profit is calculated based on explicit cost only .True or false

Answer 1

True

Economic Profit = Total Revenue - Explicit Costs - Implicit Coststs

Accounting Profit = Total Revenue - Explicit Costs

Accounting profit the net income for a company, which is revenue minus expenses. Economic profit is similar to accounting profit, but it includes opportunity costs.
Accounting profit includes explicit costs, such as raw materials and wages. Economic profit includes explicit and implicit costs, which are implied or imputed costs.Economic profit is determined by economic principles, not by accounting principles.  

Explicit costs are those costs that are deemed out-of-pocket costs or, in other words, accounting costs.These are your fixed and variable costs of doing business. Examples of explicit costs include wages, lease payments, utilities, raw materials, and other direct costs.

Implicit costs are those costs that don't involve a monetary payment.These are the opportunity costs of doing business. Examples are foregone rent on office space owned and used by the firm. The owner of a firm forgoing an opportunity to earn a large salary in MNC by starting his own business.