Economic Profit Calculator (accounting profit − opportunity costs)

Understanding the economic profit calculator — concept and principle

This calculator works out economic profit: accounting profit minus the opportunity costs of the owner's own time, money and other resources. It shows accounting profit, total implicit costs, the forgone return on capital, total cost including opportunity costs, and whether the business beats the next-best alternative. Entrepreneurs deciding whether to keep a business, and economics students, use it.

Also count what you gave up — with the default inputs: −$12,000.

How it is calculated

Accounting profit = total revenue − explicit costs
Forgone return on own money = money tied up × alternative return %
Implicit costs = income given up + forgone return + other implicit costs
Economic profit = accounting profit − implicit costs
Total cost including opportunity costs = explicit costs + implicit costs

Positive economic profit: better than the alternative; zero: normal profit; negative: worse.

The principle

Every resource has a next-best use. If you leave a salaried job to run a business, the salary you give up is a real cost of your choice, even though no one sends you a bill. The same applies to savings invested in the business, which could have earned interest elsewhere, or premises you own, which could have been rented out. Economic profit subtracts these implicit costs. Zero economic profit, called normal profit, means the business pays exactly as well as the alternative.

Worked example

Defaults: revenue 200,000; explicit costs 85,000; income given up 125,000; own money 50,000 at 4%; other implicit costs 0.

Accounting profit = 200,000 − 85,000 = $115,000.
Forgone return = 50,000 × 4% = $2,000.
Implicit costs = 125,000 + 2,000 + 0 = $127,000.
Economic profit = 115,000 − 127,000 = -$12,000.
Total cost including opportunity costs = 85,000 + 127,000 = $212,000; result: Worse than the alternative.

Each point is the calculator re-run with only “Total revenue for the year” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Total revenue for the year	Economic profit
50,000	-$162,000
100,000	-$112,000
150,000	-$62,000
200,000	-$12,000
250,000	$38,000
300,000	$88,000
400,000	$188,000

How to read the result

Here the business looks profitable on paper, with 115,000 accounting profit, but the owner would be 12,000 better off in the next-best job with the money in safe investments. That does not automatically mean closing: independence, growth prospects or enjoyment may matter. But it shows the true financial price of the choice.

Common mistakes

Counting the forgone salary also as an explicit cost.
Using an unrealistic alternative salary or return.
Forgetting non-money resources such as owned premises.
Comparing a growing start-up's first year with a stable job without considering future years.

Keep in mind: Opportunity costs are estimates and personal. The result supports a decision; it is not financial advice.

Frequently asked questions

Can a firm with accounting profit have negative economic profit?

Yes, as in this example: accounting profit of 115,000 but economic profit of −12,000.

What is normal profit?

Zero economic profit: the business earns exactly what the resources would earn in their best alternative use.

Why does economic profit tend to zero in competitive markets?

Positive economic profit attracts new firms, which push prices down until only normal profit remains in the long run.

Sources: OpenStax, Principles of Economics, 3rd ed. (2022), section 7.1 "Explicit and Implicit Costs, and Accounting and Economic Profit"

Checked 9 Nov 2026. Economic profit = total revenue − explicit costs − implicit (opportunity) costs; accounting profit = total revenue − explicit costs: OpenStax, “Principles of Economics”, 3rd ed. (2022), section 7.1 “Explicit and Implicit Costs, and Accounting and Economic Profit” (worked example: revenue 200,000, explicit costs 85,000, forgone salary 125,000).

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