Professional Documents
Culture Documents
Economic
profit (EP)
◆ The firm’s costs include Explicit Costs and ◆ AP = revenue - tangible costs (e.g. rent,
Implicit Costs: wage bill, electricity, etc.)
■ Explicit Costs: costs that involve a direct
money outlay for factors of production.
■ Implicit Costs: costs that do not involve a ◆ EP = revenue - tangible costs - opportunity
direct money outlay (e.g. opportunity costs cost
and depreciation).
or
EP = AP - OC
Account profit vs. Economic profit Account profit vs. Economic profit
or
Use the concept of “opportunity cost” to answer.
If AP ≥ OC, successful