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When economic profits are zero, the firm earns normal profit, in which normal profits are equal to the return that a firm could have earned if the firm would invest in other markets. If economic profits are greater than zero, the firm earns over and above normal profits.

To calculate the economic cost, subtract the projected implicit costs from the pre-determined accounting cost. With this calculation, you may determine if an alternative business option could save the company money.

Economic profit = revenues - explicit costs - opportunity costs. If you excluded the opportunity costs from this equation, you'd get simply the accounting profit. However, when you subtract the opportunity costs as well, the economic profit results.

Finding profit is simple using this formula: Total Revenue - Total Expenses = Profit.

Economic profit is found when explicit and implicit costs are subtracted from total revenue. Economic Profit = Total Revenue - (Explicit Costs + Implicit Costs). Notice that economic profit can be negative even if profit is positive.

Firms enter an industry when they expect to earn economic profit. These short-run profits are enough to encourage entry. Zero economic profits in the long run imply normal returns to the factors of production, including the labor and capital of the owners of firms.

How to calculate economic profits Total revenue = number of products or services sold x price per product or service. Total cost = total explicit cost + total implicit cost. Economic profit = total revenue - total cost. Economic profit = accounting profit - implicit costs.