If a manufacturing firm ends its year with a total revenue equal to its production costs and opportunity costs combined, then which of the following terms best describes its economic profit for the year?
Zero

ZERO ECONOMIC PROFIT

Explanation:

If a manufacturing firm ends its year with a total revenue equal to its production costs and opportunity costs combined, then the term best describes its economic profit for the year is Zero economic profit because by definition Economic profit is the difference between total monetary revenue and total costs, but total costs include both explicit and implicit costs.

Hence if at the end of the year the total revenue equals production and opportunity costs, then there is NO ECONOMIC PROFIT

The Economic Profit of the Company will be zero, where Revenue equals its production and opportunity costs

Explanation:

The concept of Profit can be viewed from 2 perspectives, the Accounting profit and the economic profit.

The Accounting Profit is the basic recognition of a Business success which is measured as Revenue being well over its Costs. Costs in this regard are considered explicit Costs because they are easily measurable and attributable to the operations of the Business

Economists believe however there is a subtle measure of costs often overlooked by Businesses; the Implict Costs or Opportunity Costs. Economics suggests that in addition to the explicit costs above the Revenue should cover the Implicit Cost of a business.

The implicit costs will include benefits foregone to operate the way a business is being set up to operate e.g the savings foregone by not operating from the Owners Garage or the Income foregone by retiring to set up the firm by the owner.

The economic profit = Revenue - Implicit Costs - Explicit Costs

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