The Difference Between Zero Accounting Profit and Zero Economic Profit

question 36

Multiple Choice

The difference between zero accounting profit and zero economic profit is that

• A)an economic profit of zero indicates a fair rate of return because it includes opportunity cost.opportunity cost and 
• B)an economic profit of zero indicates an unacceptable rate of return because it does not include opportunity cost.
• C)an economic profit of zero indicates more than a fair rate of return because it includes opportunity cost and explicit cost..
• D)an accounting profit of zero indicates a fair rate of return because it includes opportunity cost.

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Definitions:

Newsvendor Model

A mathematical model used to determine optimal inventory levels for products that have uncertain demand and a limited selling period.

Purchase Quantity

The total number of units of a product that a customer buys at one time.

Average Profit

The total profit divided by the number of entities, indicating the average amount of profit per entity.

Spider Chart

A spider chart, also known as a radar chart, is a graphical method of displaying multivariate data in the form of a two-dimensional chart of three or more quantitative variables represented on axes starting from the same point.