Question

If a firm is making an economic profit of zero:__________.

Answer 1

Answer:

The correct answer is letter "D": the firm should change to a different line of business.

Explanation:

Economic profit is the difference between the revenue a firm earns from sales and the firm's total opportunity costs. It is important to distinguish between accounting profit and economic profit. Accounting profit is total revenue minus the explicit costs of producing goods or services. Economic profit includes the opportunity costs a company losses or gains by choosing a route to pursue revenue. If a firm has an economic profit of zero, it implies the company should start looking for alternative ways to generate income.