The document discusses the difference between accounting profit and economic profit for a business venture called Red's Phat Burritos. Accounting profit only considers explicit costs, which for this business was $2000. However, economic profit also accounts for implicit opportunity costs of $3000, such as wages that could have been earned elsewhere. When these implicit costs are included, the economic profit for Red's Phat Burritos was actually a $1000 loss rather than the $2000 accounting profit.

1. My Business Venture Comparing Economic Profit to Accounting Profit

2. Total Revenues – Total Costs = Profit or Loss Price X Quantity Normal Profit : Opportunity Cost of Entrepreneur.

3. My Business Venture RED'S PHAT BURRITOS

4. TOTAL REVENUE 2000 BURRITOS SOLD @ $5.00 = $10,000 TOTAL EXPENSES CITY PERMIT $2000 PAYMENT TO FORMER STUDENT TO MAKE BURRITOS $3000 PAYMENT TO REDDY RENTS FOR EQUIPMENT: (Capital, Fridge, Cash register, Utensils, ect.) $2000 Payment to Mpls. Industrial Food Supply $1000 TOTAL COST $8000 ACCOUNTING PROFITS: (total revenue – total cost) $2000

5. Did I really make accounting profits? What did my accountant forget? It turns out I could have worked for the summer at Sears selling refrigerators SEARS NET WAGES $2900 FORGONE INTEREST ON START UP CAPITAL $100 Total Implicit Costs $3000

6. Economic (opportunity) Costs T O T A L R E V E N U E Profits to an Economist Profits to an Accountant ECONOMIC COSTS Economic Profit Implicit costs (including a normal profit) Explicit Costs Accounting costs (explicit costs only) Accounting Profit

7. WHAT WAS THE OPPORTINITY COST OF RUNNING MY BUSINESS? DID I MAKE AN ECONOMIC PROFIT WITH PHAT BURRITOS? Accounting Profit $2000 Implicit Costs $3000 Economic Profit - ($1000)

8. THE END