economic profit
Also known as profitability, accounting profit, book profit, profit
concept in economics
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Economic profit is the money a business keeps after paying all its costs, including both obvious expenses like wages and materials as well as hidden costs like the opportunity to use money or resources elsewhere. It matters because it shows whether a business is truly doing better than its next-best alternative, helping explain which companies will survive and grow in a competitive market.
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Difference between how accountants and economists view a firm In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as "surplus value". It is equal to total revenue minus total cost, including both explicit and implicit costs.
It is different from accounting profit, which only relates to the explicit costs that appear on a firm's financial statements. An accountant measures the firm's accounting profit as the firm's total revenue minus only the firm's explicit costs. An economist includes all costs, both explicit and implicit costs, when analyzing a firm. Therefore, economic profit is smaller than accounting profit.