Laura leaves her job as an accountant,where she earns $80,000 per year,to start her own business.After the first year,her business earns a profit of $60,000.How would an economist describe the profitability of Laura's career change?

Question

Quizplus · Accepted Answer

Economists consider both explicit and implicit costs. Laura's explicit profit from her business is $60,000, but she also has an implicit cost of $80,000, which is the forgone salary from her previous job. Therefore, her economic loss is $20,000 ($60,000 - $80,000).

Laura Leaves Her Job as an Accountant,where She Earns $80,000