The correct answer is: The firm will face an accounting loss but earn economic profits.
Economic profits are the difference between total revenue and total economic costs, while accounting profits are the difference between total revenue and total accounting costs. Economic costs include both explicit costs (such as wages and materials) and implicit costs (such as the opportunity cost of capital).
If a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it, then it will face an accounting loss. This is because accounting profits do not take into account implicit costs. However, the firm may still earn economic profits if total revenue is greater than total economic costs. This is because economic profits take into account both explicit and implicit costs.
For example, suppose a firm sells its product for $100, and its total explicit costs are $80. The firm’s accounting profits would be $20. However, if the opportunity cost of the firm’s capital is $15, then the firm’s economic profits would be $5.
In conclusion, a firm that sells its product at a price lower than the opportunity cost of the inputs used to produce it will face an accounting loss but may earn economic profits.