Answer :
Final answer:
Profit can be calculated as Revenue minus Expenses, which is the definition of accounting profit. Economic profit, in contrast, also deducts implicit costs. The correct answer is A. Revenue minus expenses.
Explanation:
Profit may be calculated as Revenue minus Expenses. This is known as the accounting profit, which can be exemplified by subtracting explicit costs from the revenue of a business. For example, if a company has revenues of $200,000 and explicit costs of $85,000, the accounting profit would be $115,000.
It is important to distinguish between accounting profit and economic profit. Accounting profit is a cash concept and does not take into account implicit costs. On the other hand, economic profit is calculated by subtracting both explicit and implicit costs from total revenue. While a business pays income taxes based on its accounting profit, its economic success depends on its economic profit.
The correct answer to the student's question is A. Revenue minus expenses.
