ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Economic profit is total revenues minus total costs-explicit plus implicit costs.

Detailed explanation-2: -Economic Profit Conclusion Economic profit can be calculated by subtracting the opportunity cost from the accounting profit. The opportunity cost is the investment that the business will need to give up investing in the current opportunity.

Detailed explanation-3: -Economists include both implicit costs and the regular costs of doing business when calculating total economic profit. In other words, economic profit is the revenue a company generates minus the cost of doing business and any opportunity costs.

Detailed explanation-4: -An implicit cost is a non-monetary opportunity cost that is the result of a business – rather than incurring a direct, monetary expense – utilizing an asset or resource that it already owns.

Detailed explanation-5: -Calculating Implicit Costs. First you have to calculate the costs. You can take what you know about explicit costs and total them: Subtracting the explicit costs from the revenue gives you the accounting profit. You need to subtract both the explicit and implicit costs to determine the true economic profit: