For Most Firms, the Major Difference Between Accounting Profit and Economic

question 8

Multiple Choice

For most firms, the major difference between accounting profit and economic profit is that

• A) explicit and implicit costs are included in the accounting profit while only explicit costs are included in economic profit.
• B) accounting profit omits the salaries of managers, and therefore, it is generally greater than economic profit.
• C) accounting profit is based on opportunity cost, whereas economic profit is based on market transactions.
• D) accounting profit does not consider the opportunity cost of the firm's equity capital and, therefore, generally overstates economic profit.

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Definitions:

Deterministic View

The belief that all events, including human actions, are ultimately determined by causes external to the will, implying that there is no free will.

Conscious Free Will

The ability of individuals to make choices and decisions based on their own conscious reasoning and volition.

Physiological Measurement

The quantitative assessment of biological parameters in humans or animals, which can include heart rate, blood pressure, and hormone levels.

Muscle Tension

The physical condition of tightened muscles, usually as a result of stress, anxiety, or physical exertion.