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6 September, 20:10

Is it possible for accounting profit to be positive and economic profit to be negative?

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  1. 6 September, 20:47
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    Yes.

    Explanation:

    We know,

    Accounting profit = Revenue - Explicit cost.

    Economic profit = Revenue - Explicit cost - Implicit cost

    Explicit cost is the day to day expenses, while the implicit cost is the expanses that have already occurred.

    Therefore, the explicit cost may not be higher than the revenue. So accounting profit can be positive.

    However, as we have to deduct the explicit cost as well as implicit cost from economic profit, it can be positive, negative, or even zero. So the statement is correct.
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