What is zero economic profit?

Answer

According to Dr. Ray Batina of Washington State University, zero economic profit is the profit maximization point. At this point, price is equal to marginal cost. This scenario only applies to a perfectly competitive market.

According to Oregon State University, economic profits and accounting profits are different. Accounting profits are the total revenue minus the total costs. Economic profits are total revenue minus implicit and explicit costs. These include opportunity costs, which are costs a business gives up that are not in the budget, such as a salary from another business in lieu of self-employment. Just because a business has zero economic profits does not mean that the business is not turning an accounting profit. In fact, a firm that produces zero economic profits produces an accounting profit, all else being equal. In the short run, some firms do not maintain zero economic profit. At this point, price is less than average total costs.

According to Penn State University's Department of Energy and Mineral Development, in order for profit maximization of a firm to occur, implicit and explicit costs must equal total revenue. Otherwise, the firm loses money or has too little supply and too great a demand to maintain price in the long run.

Q&A Related to "What is zero economic profit?"
Some say global profits are zero-sum but only relatively. Some things like mining and consumer goods (sometimes major categories) look like new profits gauranteed. Its interesting
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Stagnation or zero growth as long as they aren't losing money.
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A zero economic profit means the accounting profits are just high enough to offset the
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The reason for this can be seen in the definition of economic profit and in the definition of perfect competition. Economic profit means profit after you pay out your explicit AND
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Normal profit in economics is when economic profit is equivalent to zero. The normal profit is considered the minimum level that a company must maintain in order ...
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