Question

3. What’s the fundamental difference between how accountants and economists measure costs and revenues?

Answer 1

Ans 3. Accounting profit refers to the net income of the company and tells the difference between revenue and explicit costs of a company. On the other hand, economic profit refers to the difference between revenue and costs but it also includes the opportunity cost.

Thus, in addition to the explicit costs and revenues included by the accountants, economists also include all the implicit costs and revenues when calculating profits. This is the fundamental difference between how accountants and economists measure costs and revenues.