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Answer (B) is correct . Implicit costs are amounts that would have been received if self-owned resources had been used outside the firm’s business. Economic profit is pure profit, or the excess of revenue over both explicit and implicit costs. Revenues of $2?million minus explicit costs of $700,000 result in accounting income of $1.3 million. That amount is reduced by the $200,000 of implicit costs to arrive at economic profit of $1.1 million.

Answer (A) is incorrect because The $200,000 of implicit costs is not used in computing accounting income.
Answer (C) is incorrect because Economic income will be less than accounting income when there are implicit costs.
Answer (D) is incorrect because Implicit costs reduce accounting income rather than increase it.