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AP Microeconomics 3.4 Types of Profit Questions

Distinguish accounting, economic, and normal profit by including implicit opportunity costs, then calculate a firm’s profit or loss.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • separate explicit business expenses from implicit costs such as forgone wages or interest
  • calculate accounting and economic profit from revenue, explicit costs and implicit costs
  • use total or per-unit revenue and cost data to calculate economic profit or loss
  • interpret normal profit, zero economic profit and positive accounting profit correctly

Covered syllabus points

CBA-2.C—a. Define the different types of profit. b. Explain how firms respond to profit opportunities. c. Calculate a firm’s profit or loss

Question 1

[Maximum number: 1]

Anderson Company is a typical firm that manufactures Good G in a constant-cost, perfectly competitive market. Anderson Company is currently earning positive economic profit.

What must be true about the relationship between accounting profit and economic profit if Anderson Company currently incurs both explicit and implicit costs in production?

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