Answer to Question #48527 in Microeconomics for Yoyo

Question

A firm earning negative economic profits must be earning negative accounting profits. Explain why this statement is True, False, or Uncertain according to economic principles.

Answer 1

False
Negative economic profit does not mean that firm would have negative accounting profit. The difference here is possible benefits that could be gained by using assets. If the value of such potential benefits is high and accounting profit is slightly positive than we would have negative economic profit and positive accounting profit