What is my economic profit?
Enter total revenue, the explicit costs you pay out, and the implicit costs of what you give up. The economic profit calculator subtracts both kinds of cost from revenue and shows accounting profit, which leaves out the implicit costs.
- Economic profit
- −$10,000.00
Economic profit is −$10,000.00; accounting profit, before implicit costs, is $115,000.00.
- Accounting profit
- $115,000.00
- Total economic cost
- $210,000.00
Economic profit: −$10,000.00. Economic profit is −$10,000.00; accounting profit, before implicit costs, is $115,000.00.
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Computes economic profit, total revenue minus explicit and implicit costs, and accounting profit, total revenue minus explicit costs.
Example with the default inputs (Total revenue $200,000.00, Explicit costs $85,000.00, Implicit costs $125,000.00): Economic profit is −$10,000.00; accounting profit, before implicit costs, is $115,000.00.
Method: Economic profit = total revenue − explicit costs − implicit costs. Accounting profit = total revenue − explicit costs. Total economic cost = explicit costs + implicit costs.
- Implicit costs are opportunity costs: what the owner’s own time, money and property would earn in their next best use.
- All amounts are for the same period, such as one year.
- Arithmetic is exact on the typed decimals; money shows to the cent, halves up.
Worked examples
Each example is checked against the calculator on every build.
- Total revenue $200,000.00, Explicit costs $85,000.00, Implicit costs $125,000.00 gives Economic profit -$10,000.00, Accounting profit $115,000.00, Total economic cost $210,000.00.Source: OpenStax, Principles of Microeconomics 3e, 7.1 Explicit and Implicit Costs, and Accounting and Economic Profit (accounting profit = total revenue − explicit costs; economic profit = total revenues − explicit costs − implicit costs; Eryn’s law practice: revenue $200,000, rent $50,000, clerk $35,000, forgone salary $125,000, economic profit −$10,000). https://openstax.org/books/principles-microeconomics-3e/pages/7-1-explicit-and-implicit-costs-and-accounting-and-economic-profit: 200,000 − 85,000 − 125,000 = −10,000
- Total revenue $480,000.00, Explicit costs $310,000.00, Implicit costs $90,000.00 gives Economic profit $80,000.00, Accounting profit $170,000.00, Total economic cost $400,000.00.Source: OpenStax, Principles of Microeconomics 3e, 7.1 Explicit and Implicit Costs, and Accounting and Economic Profit (accounting profit = total revenue − explicit costs; economic profit = total revenues − explicit costs − implicit costs; Eryn’s law practice: revenue $200,000, rent $50,000, clerk $35,000, forgone salary $125,000, economic profit −$10,000). https://openstax.org/books/principles-microeconomics-3e/pages/7-1-explicit-and-implicit-costs-and-accounting-and-economic-profit
- Total revenue $150,000.00, Explicit costs $100,000.00, Implicit costs $50,000.00 gives Economic profit $0.00, Accounting profit $50,000.00.Source: OpenStax, Principles of Microeconomics 3e, 7.1 Explicit and Implicit Costs, and Accounting and Economic Profit (accounting profit = total revenue − explicit costs; economic profit = total revenues − explicit costs − implicit costs; Eryn’s law practice: revenue $200,000, rent $50,000, clerk $35,000, forgone salary $125,000, economic profit −$10,000). https://openstax.org/books/principles-microeconomics-3e/pages/7-1-explicit-and-implicit-costs-and-accounting-and-economic-profit
- Total revenue $98,765.43, Explicit costs $45,678.90, Implicit costs $12,345.67 gives Economic profit $40,740.86, Accounting profit $53,086.53, Total economic cost $58,024.57.Source: OpenStax, Principles of Microeconomics 3e, 7.1 Explicit and Implicit Costs, and Accounting and Economic Profit (accounting profit = total revenue − explicit costs; economic profit = total revenues − explicit costs − implicit costs; Eryn’s law practice: revenue $200,000, rent $50,000, clerk $35,000, forgone salary $125,000, economic profit −$10,000). https://openstax.org/books/principles-microeconomics-3e/pages/7-1-explicit-and-implicit-costs-and-accounting-and-economic-profit
How it works
- Economic profit = total revenue − explicit costs − implicit costs
- Accounting profit = total revenue − explicit costs
- Total economic cost = explicit costs + implicit costs
Rules:
- Each amount is $0 or more, at most $1 quadrillion. Both profits may be negative (a loss).
- A profit that is not 0 but too small to show as a number gives no answer.
- The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).
Assumptions
- Explicit costs are what the business pays out: wages, rent, materials, interest. Implicit costs are what the owner gives up: the salary they would earn elsewhere, or what their own money and property would earn in their next best use.
- All amounts are for the same period, such as a year.
Worked examples by hand
Eryn's law practice. Explicit costs = 50,000 + 35,000 = $85,000. Accounting profit = 200,000 − 85,000 = $115,000. Economic profit = 200,000 − 85,000 − 125,000 = −$10,000.
Revenue covers both kinds of cost. Economic profit = 480,000 − 310,000 − 90,000 = $80,000; accounting profit = $170,000.
Zero economic profit. 150,000 − 100,000 − 50,000 = $0: the owner earns what the next best use would pay. Accounting profit = $50,000.
Cents in every amount. Economic profit = 98,765.43 − 45,678.90 − 12,345.67 = $40,740.86; accounting profit = $53,086.53.
Other questions people ask
What is economic profit?
Economic profit is total revenue minus all costs, including implicit costs: the income the owner gives up by not using their time, money and property in the next best way. A positive economic profit means the business earns more than the alternatives would.
How do I calculate economic profit?
Subtract explicit costs and implicit costs from total revenue. Eryn expects $200,000 a year from her own law practice, pays $85,000 for an office and a clerk, and gives up a $125,000 salary: 200,000 − 85,000 − 125,000 = −$10,000.
What is the difference between accounting profit and economic profit?
Accounting profit subtracts only explicit costs, the cash a business pays out. Economic profit also subtracts implicit costs. Eryn’s accounting profit is $115,000, but her economic profit is −$10,000, because she would earn $10,000 more staying at the firm.
What are implicit costs?
Implicit costs are opportunity costs of resources the business already owns. Common ones are the salary an owner gives up to run the business, the interest the owner’s own money could earn elsewhere, and the rent the owner’s building could earn.
What does zero economic profit mean?
Revenue just covers the explicit costs and the implicit costs, so the owner earns exactly what the next best use of their resources would pay. The business is still worth running; it is not losing money in the accounting sense.
Can accounting profit be positive while economic profit is negative?
Yes. Whenever implicit costs are larger than the accounting profit, economic profit is negative. That is a sign the owner’s time and money would earn more elsewhere.