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Economics and You working out of your basement or Advertising agency? Economic profit vs accounting profit?

peru home
Frank The Tank asked:

Maria imports sweaters from Peru and sells them from her home. She collects $400,000 in revenue a year, and spends $200,000 on the sweaters and shipping costs, as well as $25,000 on accounting services and utilities. She used to make $100,000 per year working for an advertising agency. Now she works out of the basement of her house, for which she doesn’t have any other marketable use. She has no other expenses.

If Maria’s Accounting profit is: $175,000.00
What is Maria’s economic profit?

Economic profit is
The value that remains after all costs, including the opportunity costs of the operator’s labor and capital, have been subtracted from gross

One Comment

  1. Frank Rirrzo says:

    isnt accounting profit the same as economic profit?

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