Question

Which of the following statements is true? a. Economic profits ignore implicit costs. b. Economic profits include implicit costs. c. Accounting profits include all of the opportunity costs. d. Economists consider sunk costs in their decision making

Answer 1

Answer:

Option (b) is correct.

Explanation:

Economic profit is the difference between total revenue and total costs. Total costs includes both implicit costs as well as explicit costs. Implicit costs refers to the opportunity cost that are associated with the choice of alternatives.

Accounting profits includes only explicit costs. Explicit costs are the costs which are incurred for operating a business.