Types of Profit

Economic Profit

Total Revenue (TR) minus explicit and implicit costs, focusing on resource efficiency.

Accounting Profit

Total Revenue (TR) minus explicit costs, representing what the business earned on paper.

Negative Economic Profit

Occurs when a business does not cover its opportunity costs, indicating inefficient resource use.

Zero Economic Profit

When a business covers all explicit and implicit costs, equivalent to normal profit, implying no loss or gain.

Positive Economic Profit

When a business covers all costs and achieves surplus, signaling success and attracting competition.

Total Revenue (TR)

Calculated as price times quantity of goods sold.

Total Cost

The sum of all costs incurred, calculated as unit cost times quantity.

Total Profit

The total earnings of a business, calculated as unit profit times quantity.