Question

A firm earning zero economic profits is probably suffering losses from the standpoint of general accounting principles. Do you agree or disagree with this​ argument?

Answer 1

Answer:

I disagree

Explanation:

From the standpoint of accounting principles, a company is earning losses when total cost is greater than total revenue.

Economic profit is accounting profit less explicit cost or opportunity cost.

If a firm is earning zero economic profit , it is necessarily not earning negative loss from an accounting standpoint.

For example if a firm has a total revenue of $20, total cost of $10 and an opportunity cost of $10.

Accounting profit is $10 while economic profit is $0.

Though, the economic profit is 0, accounting profit is still postive.

I hope my answer helps you.