For a poetry farm, the capital gain is $70,000 while the economic profit is $6,000.
<h3>Why does accounting profit exist?</h3>
The owner's profit, or company profit, is what is meant by accounting profit. This profit may be obtained by totaling all business income and deducting specified costs from the total. The explicit cost in this context refers to expenses spent in the course of operating the firm, such as rent paid, labor costs paid, materials acquired, etc.
<h3>Briefing:</h3>
Accounting costs = Helper cost + Annual rent + materials = $(11,000 + 6,000 + 22,000) = $39,000
Accounting profit = Revenue - Accounting cost = $(70,000 - 39,000) = $31,000
Implicit costs = Interest from savings foregone + earning from alternative job + entrepreneurial talent
= $(4,500 + 17,000 + 3,500) = $25,000
Economic profit = Accounting profit - Implicit costs = $(31,000 - 25,000) = $6,000
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