Profits - Accounting Profits = Total Revenue Explicit Costs ii Economic Profits These are smaller in value In determining economic profit explicit

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Profits - Accounting, Economic, Normal: A firm intends to maximize profits by maintaining as large a difference between total revenue and total cost as possible. The profits of a firm may appear in different forms. i) Accounting Profits: First there are accounting profits. These are the profits calculated as the difference between total revenue and total explicit costs of a firm. Only such costs are deducted from the revenue which have been fully paid out.
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Unformatted text preview: Accounting Profits = Total Revenue - Explicit Costs ii) Economic Profits: These are smaller in value. In determining economic profit, explicit as well as implicit costs are deducted from total revenue. Economic profits are therefore smaller in value than accounting profits. Economic profits = Total Revenue -(Explicit + Implicit Costs) iii) Normal Profits: The concept of normal profit is of analytical or theoretical nature....
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This note was uploaded on 11/26/2011 for the course ECON MICRO ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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