Business owners should maximize economic profit because maximizing economic profit includes setting higher prices and low quantities of products than the competitive market. This can help businesses to become more efficient and to expand on a large scale.
Economic profit is analyzed with accounting profit. Accounting profit is the profit a company shows on its income statement. Accounting profit measures inflow v/s outflow and is part of the required financial transparency of a company. Economic profit not record on company financial statements. It is required by investors.
Economic profit is a type of “what if” analysis. Companies and individuals calculate the future value of economic profit when they are faced with choices and business alternatives.
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