When economic profits in an industry are zero and implicit costs are greater than zero, what happens then?

Question

would the accounting profit be greater than zero....?

Answer 1

The accounting profits can be much greater than zero in this kind of a situation.  Because accounting rules allow companies to finance the sale of their products by loaning money to their customers and booking the potential profits of their sales immediately.

That's what happened with the US housing industry recently.  And that's what happened with the North American auto industry too.

But accounting profits are not necessarily real profits.  And this is quite evident now in both the housing and the auto industries.  Of course, company executives already got their huge bonuses for making all those imaginary profits they've made by loaning money to their customers.  And they are not about to give their bonuses back.