Economic Profit vs. Accounting Profit

In this video, 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 you view the video, think of the business you are currently in, or even dream about the business you would like to start. Identify/discuss the fixed costs, variable costs, and the implicit costs in that business.