Step 2. Subtracting the explicit costs from the revenue gives you the accounting profit.

However, these calculations consider only the explicit costs. To open her own practice, Eryn would have to quit

her current job, where she is earning an annual salary of $125,000. This would be an implicit cost of opening her

own firm.

Step 3. You need to subtract both the explicit and implicit costs to determine the true economic profit:

Eryn would be losing $10,000 per year. That does not mean she would not want to open her own business, but it

does mean she would be earning $10,000 less than if she worked for the corporate firm.

Implicit costs can include other things as well. Maybe Eryn values her leisure time, and starting her own firm

would require her to put in more hours than at the corporate firm. In this case, the lost leisure would also be an

implicit cost that would subtract from economic profits.
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