Problem:
How do the concepts of the accounting profit and economic profit diverge? Why is economic profit smaller than the accounting profit? What are the three fundamental sources of economic profit?
Categorize each of following according to those sources:
i) A firm’s profit from developing and patenting the new medication which greatly diminishes cholesterol and thus reduces the likelihood of heart disease and stroke.
ii) A restaurant’s profit which results from construction of the new highway past its door.
iii) The profit received by the firm benefiting from the unanticipated change in consumer tastes.