Suppose that for a particular business there are no implicit costs. Then, which of the following statements is true?

• A. Accounting profit is greater than economic profit.
• B. Economic profit is always zero.
• C. Economic profit equals accounting profit.
• D. Economic profit is less than accounting profit.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the difference between accounting profit and economic profit. Accounting profit is total revenue minus explicit costs, while economic profit is total revenue minus both explicit and implicit costs.
2. Step 2: Note that the problem states there are no implicit costs for the business. This means implicit costs are zero.
3. Step 3: Since economic profit subtracts both explicit and implicit costs, and implicit costs are zero, economic profit simplifies to total revenue minus explicit costs only.
4. Step 4: Recognize that accounting profit also equals total revenue minus explicit costs, so with no implicit costs, economic profit and accounting profit are the same.
5. Step 5: Conclude that under the condition of no implicit costs, economic profit equals accounting profit.