Economic Profit vs. Accounting Profit

In  the youtube video below, Sal from Khan Academy explains how the  economic concept of cost is different from accounting cost and why the  difference is important to understanding what we mean by profit. In  economics, we build opportunity cost — including 'implicit costs' —  right into the supply curve.

After viewing this video, respond to one of the following:

  • You  are the owner of a fast-food restaurant and are adding a  new item to  your menu. Identify the fixed and variable costs associated with your  new menu item.
  • Consider the table below. What is the accounting  cost of operating this business? What is the economic cost?  Why do the  two cost estimates differ? 
Field of study: 
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