Economic Profit Is a Better Measure of a Firm's Performance

question 10

Multiple Choice

Economic profit is a better measure of a firm's performance than accounting profit because

• A)accounting profit is unreliable because generally accepted accounting practices (GAAP)overstates the firm's true costs of using resources.
• B)economic profit fully accounts for all sources of revenue.
• C)as a general rule,only explicit costs can be subtracted from revenue for the purposes of computing taxable profit.
• D)the opportunity cost of using ALL resources is subtracted from total revenue.
• E)both c and d

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Definitions:

Stare Decisis

A legal principle that obligates courts to follow historical cases when making a ruling on a similar current or future case.

Federal Court Decisions

Judicial rulings made by federal courts, including district courts, appellate courts, and the Supreme Court of the United States.

Commerce Clause

The Commerce Clause is a provision in the U.S. Constitution granting Congress the power to regulate trade and commerce among the states, with foreign nations, and with Native American tribes.

Federal Government

The governing body of a nation, state, or community that operates at the national level, making and enforcing laws over a certain territory.