Economic Profit

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  • #223449

    Are items of economic profit items always expenses?

    “Economic profits will never be higher than accounting profit…” Page 134 CMA Part 2

    if economic profits < accounting profit, always… in the construct of economic profit, What would be a scenario for a business to stop operating?

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  • #223450
    Brian Hock
    HOCK international


    Economic profit is not always lower. If there are no opportunity costs, then economic profit will be equal to accounting profit.

    The reason company would stop operating like they are is if their economic profit is negative. If they have a negative economic profit, it means that it is possible that they would make more money if they employed their assets in another way than they currently are used.

    Does this answer your question?


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