Economic profit is the difference between total revenue and total economic cost.  Total revenue is measured as the sales receipts of a firm, that is, price times quantity sold.  The economic cost of any activity may be thought of as the highest valued alternative opportunity that is foregone.  To attract economic resources to some activity, the firm must pay a price for these factors (labour, capital and natural resources), that is, sufficient to convince the owners of these resources to sacrifice other alternatives and commit the resources to this use.  Thus, economic costs may be thought of as opportunity costs, or the costs of attracting a resource from its next best alternative use. Accordingly, the term economic cost refers to all costs, both explicit and implicit, including a normal return (profit) for owners of the financial resources.

Advertisement
Advertisement
The following two tabs change content below.
We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]
0 Comments

Leave a reply

Your email address will not be published. Required fields are marked *

*

*

BMS.co.in is aimed at revolutionising Bachelors in Management Studies education, also known as BMS for students appearing for BMS exams across all states of India. We provide free study material, 100s of tutorials with worked examples, past papers, tips, tricks for BMS exams, we are creating a digital learning library.

Disclaimer: We are not affiliated with any university or government body in anyway.

©2019 BMS - Bachelor of Management Studies Community 

A Management Paradise Venture

Ask Us On WhatsApp
or

Log in with your credentials

or    

Forgot your details?

or

Create Account