For example, Marcia is a computer programmer earning $70,000 per year.

She has always

wanted to run her own business and is considering opening an ice cream parlor. Marcia expects
sales of $250,000 a year, and projects explicit costs of $197,000. Her explicit expenses include
rent, labor, raw materials, insurance and utilities, so Marcia's accounting profit would be
$53,000. Should Marcia start her business? Her business would be profitable. Economists
would say, "No" because Marcia should consider what she would give up. These are her implicit
or opportunity costs. One cost is her $70,000 salary. (Marcia would work full time and need to
quit her current job.) Assume that Marcia must invest $100,000 to start her business. She would
give up the opportunity to invest $100,000 in another investment such as a CD (Certificate of
Deposit). Assume the CD earns $2,000 in interest annually. Another implicit cost is $2,000, the
interest income she would give up if she opens her ice cream parlor. Marcia's economic profit is
projected to equal a loss of $19,000, which is her accounting profit less the implicit expenses of
$72,000. Clearly Marcia would be better off financially if she did not open Marcia's Ice Cream
Parlor.