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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Suppose everything about two people is the same except that currently one person earns a high salary and the other person earns a low salary. Which person is more likely to start his or her own business and why?

To determine

Which profit is larger among the accounting profit and economic profit.

Explanation

Accounting profit can be calculated by subtracting explicit cost from total revenue.

Accounting profit=Total revenueExplicit cost

Economic profit can be calculated by subtracting both explicit costs and implicit costs from total revenue

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