Question

Zero Economic profit means that a firm is?

Zero Economic profit means that a firm is?


Homework Answers

Answer #1

The zero economic profit does not mean that the firm is earning the zero profit

Economic profit is the difference of total revenue, total cost and opportunity cost

Here opportunity cost is also called implicit cost

These implicit cost are those type of cost which are not recorded in the book value

A perfect competitive firm and monopolistic competitive firm earn zero economic profit in the long run

Zero economic profit is also called normal profit

So the answer here is that if the firm is earning zero profit it means the firm is earning the normal profit

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