Your firm has total sales revenue of $1,000,000 and total explicit costs of $600,000 and total implicit cost of $300,000. What will be the accounting profit for the firm? What will be the economic profit for the firm? Explain the difference using the
data.
Please provide the best answer for the statement.
Accounting profit is the difference between total revenue and explicit cost, so in this case it is $400,000 ($1,000,000 minus $600,000). Economic profit is the difference between total revenue and total cost (both explicit and implicit). The total of the implicit and explicit costs is $900,000 ($600,000 plus $300,000). So, economic profit is $100,000 ($1,000,000 minus $900,000).
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