What does it mean when a company makes zero accounting profit? How about zero economic profit?
When most people think about the term “profit,” they are thinking about accounting profit. However, economists also think about the idea of economic profit. This is different from accounting profit. It is bad for a company to make zero accounting profit, but it is okay for it to make zero economic profit in many circumstances.
Accounting profit is the familiar kind of profit. You figure accounting profit by subtracting costs from revenues. If a business makes zero economic profit, it is only bringing in enough revenue to cover its costs. This business will not lose money, but it will not make money for the people who...
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