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Unformatted text preview: In this case, it covers more than the projected accounting costs and all opportunity costs of the owners time and personal resources.) 3 case scenarios can arise when comparing total revenues to economic costs: 1. If TR > Economic costs, then have Economic Profit When Total Revenues exceeds all accounting costs plus opportunity costs, an economic or pure or excess profit has been realized. 2. If TR = Economic costs, then have Normal Profit or a Normal Return on the Business Investment. When Total Revenues just covers or equals the sum of all accounting and opportunity costs, then a normal profit has been realized. That is, the owner has been able to recover all of his opportunity costs as well as his normal financial obligations. 3. If TR < Economic costs, then have a loss. The owner is not making a normal return on his business investment....
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- Fall '08
- Opportunity Cost