Question

Russ owns a fried chicken stand that operates at the local beach. in calculating how much he earns from his business, russ notices a difference between his economic and accounting profits. why would russ\' economic profit differ from his accounting profit?

Answer 1

Economic profit is the monetary costs and opportunity costs a company pays and the revenue a company receives while accounting profit is the monetary costs a company pays out and the revenue a company receives. Therefore the economic profit will be lower than the accounting profit because the opportunity costs, implicit and explicit, are included in the calculation.